Daily Morning Note – 22 March 2019


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U.S. equities extended gains as investors digested a dovish lurch by policy makers in the world’s largest economy. The dollar rebounded after Wednesday’s loss, while government bond yields stabilised.

After the Federal Reserve announced yesterday that it had no plans to raise rates in 2019, stocks resumed their upward charge. The S&P 500 Index crossed the 2,850 level amid a broad-based advance Thursday that saw tech shares climbing alongside materials and real estate. Financials sat out the rally as the yield on 10-year Treasuries hovered near the lowest level in more than a year after sharp declines Wednesday.

The British pound slumped as pressure built on Theresa May to gather a majority for her Brexit deal. The U.K. prime minister is at loggerheads with the European Union over an extension to the March 29 deadline for Britain to exit the bloc, threatening to increase the chances of a no-deal departure. A rate hold by the Bank of England had little impact on the currency.


China Strategy – Foreign capital will continue to flow in

Analyst: Jieyuan Zheng

– The inclusion factor of A shares in the MSCI Emerging Markets Index will
increase to 20% in three steps, which is expected to bring more than $50bn into
the A shares market.

– In 2019 multiple indexes will include China A-share and RMB bond into their
flagship index. Foreign investment into A-shares and bond market will
deepen. Stock connect will become the main investment channel.

– Foreign capital currently prefers consumer sectors and the proportion of
emerging industries is expected to increase in the future.

Pharmaceuticals – Three therapies to support growth

Analyst: Edmund Xue

– We expect an 18.6% CAGR for the oncology therapeutic segment, which is the
key lever of growth along with anti-infection and endocrinology.

– The average operating margin for big pharma increased by 29.2% YoY in Q4
2018. We expect strong operating margins looking forward despite pricing

– There is a positive outlook for the R&D pipeline for pharma, which will help to
weather LOE and biosimilar headwinds.

– U.S. and pharmerging markets, especially China, will lead growth for the global
pharma market.

– We are EQUAL-WEIGHT on the pharma sector. Our preferred stocks are Eli Lilly
(LLY) for its expanding pipeline and solid product launches, and Merck & Co
(MRK) for its favourable margin expansion opportunities with its Keytruda
(oncology) products.


Boeing‘s 737 Max aircraft will be outfitted with a warning light for malfunctions in the anti-stall system suspected in October’s fatal crash in Indonesia, an industry source told AFP.

Amazon.com Inc has hit on a new way to grab a chunk of the US$129 billion digital advertising market now dominated by Google and Facebook: sell video spots on the e-commerce giant’s smartphone shopping app.

Facebook on Thursday admitted that millions of passwords were stored in plain text on its internal servers, a security slip that left them readable by the social networking platform’s employees.

A Google executive offered new details on Wednesday about the company’s upcoming video game streaming service, telling Reuters that game makers may use competing cloud providers and must avoid some inappropriate content.

Shares in Levi Strauss & Co surged 31 per cent in their debut on Thursday, giving the jeans maker a market value of US$8.7 billion and suggesting strong investor appetite before much-awaited listings from Lyft and Uber.

Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, PSR

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