DAILY MORNING NOTE | 23 March 2023

Trade of the Day

Alibaba Group Holdings Ltd (NYSE: BABA)

Analyst: Zane Aw

(Current Price: US$83.70) – TECHNICAL BUY
Buy price: US$83.70 Stop loss: US$79.00 Take profit: US$92.00

Xpeng Inc. (NYSE: XPEV)

Analyst: Zane Aw

(Current Price: US$9.91) – TECHNICAL BUY
Buy price: US$9.91 Stop loss: US$8.90 Take profit: US$12.90

Singapore shares recorded gains for the second straight session on Wednesday (Mar 22), closing 1.5 per cent higher. The trio of local banks were among the top gainers. DBS rose 1.8 per cent or S$0.59 to S$33.50, OCBC gained 1.3 per cent or S$0.16 to S$12.36, while UOB jumped 2.9 per cent or S$0.82 to end at S$29.50.

Wall Street stocks slumped on Wednesday as the US Federal Reserve continued hiking interest rates to fight inflation, while noting that banking sector turmoil could weigh on the economy. The Dow and tech-heavy Nasdaq both ended 1.6 per cent lower, while the S&P 500 shed 1.7 per cent.

SG

The Monetary Authority of Singapore (MAS), on March 22, announced that it intends to stick to the hierarchy of claims in liquidation should it need to exercise its powers to resolve a financial institution (FI). This means that equity holders will absorb losses before holders of Additional Tier 1 (AT1) and Tier 2 capital instruments.

City Developments Limited (CDL) is acquiring an 87.9 per cent effective group interest in Australia’s Sofitel Brisbane Central hotel for A$177.7 million (S$159.2 million), which translates to about A$427,000 per key. Through CDL’s wholly-owned subsidiary Millennium & Copthorne Hotels (M&C) and in a 50:50 joint venture with its New Zealand-listed subsidiary, M&C New Zealand, the group will acquire Sofitel Brisbane Central hotel from Brookfield Asset Management, a New York-listed investment management company.

Sembcorp Industries, an energy company backed by state-owned investor Temasek Holdings, is considering selling its waste management unit, according to people with knowledge of the matter. The company is working with a financial adviser on the potential divestment of SembWaste and could seek as much as US$700 million for the unit, the people said. Other investment firms and companies in the industry have shown interest in the business, the people said, asking not to be identified as the process is private.

Q&M Dental Group is proposing to amend its performance share plan, which was adopted by the group’s shareholders at its annual general meeting (AGM) on Nov 13, 2018. Under the changes, the group’s dentists who are not employees of the group will be eligible to be awarded shares in the group.

US

The Federal Reserve on Wednesday raised interest rates by a quarter of a percentage point, but indicated it was on the verge of pausing further increases in borrowing costs after recent the recent collapse of two US banks. Fed Chairman Jerome Powell sought to reassure investors about the soundness of the banking system, saying that the management of Silicon Valley Bank “failed badly”, but that the bank’s collapse did not indicate wider weaknesses in the banking system. The Federal Open Market Committee policy statement also said the US banking system is “sound and resilient.”

The former owner of Silicon Valley Bank, seized earlier this month by regulators, will need to wait, possibly for several months, to know if it can get back about US$2 billion ($2.67 billion) in cash it would need to repay bondholders and other creditors. SVB Financial Group won provisional court approval Tuesday to spend only a fraction of the cash the company claims federal regulators must return. What happens with the rest of the money will need to be decided in the coming months, with lawyers for bondholders owed more than US$3.3 billion saying they are concerned that the Federal Deposit Insurance Corp. will try to keep the cash.

NVIDIA, the US semiconductor designer that dominates the market for artificial intelligence (AI) chips, said it has modified its flagship product into a version that is legal to export to China. On Tuesday (Mar 21), the company said it has similarly developed a China-export version of its H100 chip. The new chip, called the H800, is being used by the cloud computing units of Chinese technology firms such as Alibaba Group Holding, Baidu and Tencent Holdings, a company spokesperson said.

The Biden administration unveiled tight restrictions on new operations in China by chipmakers that get federal funds to build in the US, potentially hampering efforts to expand in the world’s largest semiconductor arena. The US$50 billion Chips and Science Act will now bar firms that win grants from expanding output by 5 per cent for advanced chips and 10 per cent for older technology. The Commerce Department also outlined other measures including a US$100,000 spending cap on investments in advanced capacity in China.

Tencent Holdings Ltd.’s revenue inched 1% higher after two successive quarters of contractions, fueling hopes a Chinese economic recovery coupled with a looser regulatory environment will revive its growth in 2023. China’s gaming and social media leader reported a 15% jump in online advertising revenue in the final three months of 2022, as its TikTok-style video feature drew marketers.

UBS Group is offering to buy back 2.75 billion euros (S$3.95 billion) worth of bonds it issued last Friday (Mar 17), just days before the bank said it would acquire troubled rival Credit Suisse Group following hastily arranged crisis talks. The Swiss lender is inviting holders of the senior unsecured bail-in notes due in March 2028 and March 2032 to tender the securities for cash at their respective re-offer price, it said in a statement on Wednesday (Mar 22).

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

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