Daily Morning Note – 24 January 2022
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Asian stocks looked set for further declines Monday amid concerns about tightening Federal Reserve policy, while cryptocurrencies nursed a plunge that highlights waning ardor for speculative investments.
Australian shares fell as did futures for Japan and Hong Kong after one of the worst stretches for global shares last week since the pandemic began. Gains in U.S. contracts held out the hope of some respite. The dollar was mixed.
The Fed on Wednesday is expected to signal a March liftoff in interest rates and balance-sheet reduction later this year. Ebbing stimulus is forcing a rethink about the economic and market outlook.
How the policy shift will affect fixed income is among the key questions. Treasuries initially slumped at the start of last week before rallying sharply to leave the 10-year yield just above 1.75%.
In the volatile cryptocurrency sector, bruised Bitcoin stabilized around $36,000 in the wake of a plunge over the past three days. Digital coins have shed more than $1 trillion in value since a November high.
A consortium of Keppel Land’s unit Keppel Land Vietnam Properties, Keppel Vietnam Fund (KVF) and a co-investor of KVF is planning to acquire a 49 per cent interest in 3 residential land plots in Hanoi for an aggregate consideration of 2,715 billion dong (S$159.7 million). The consortium has entered into a binding heads of agreement with real estate company Phu Long Real Estates Joint Stock Company, a subsidiary An Khanh New City Development Joint Venture Company for the acquisition, Keppel Corp announced in a press statement on Saturday (Jan 22). The 3 sites totalling 14.2 ha comprise 2 land plots zoned for landed housing development and 1 land plot for a high-rise condominium. The necessary development approvals, including the masterplan and land use right certificates for the 3 sites, have been obtained, Keppel noted.
LJHB Holdings has raised its stake in property developer Keong Hong Holdings Keong Hong: 5TT 0% from 26.7 per cent to 45.8 per cent, triggering a mandatory conditional cash offer for all the shares it does not already own at S$0.384 per share. This comes after LJHB entered into a sale and purchase agreement with Keong Hong chairman and chief executive officer Ronald Leo for 44.8 million shares or 19.1 per cent of the company on Friday (Jan 21), Keong Hong said in a bourse filing. LJHB’s ultimate shareholder is Liu Haiyan and its board comprises Liu, Lin Jinru, and Chen Bin. Once the acquisition is completed, Leo will own 11.8 per cent of Keong Hong. He has given an irrevocable undertaking to not sell his remaining stake in Keong Hong.
Keppel Data Centre Fund II has achieved US$1.1 billion worth of total commitments at its final close with Asian Infrastructure Investment Bank (AIIB) joining as its latest investor. In a press statement on Friday (Jan 21), Keppel Capital said AIIB made a US$100 million investment in the fund through a parallel fund structure, and another US$50 million through co-investments. The asset management arm of Keppel Corporation added that the fund had also attracted investments from sovereign wealth funds, financial institutions, insurance funds, and pension funds.
Singapore-based contractor Alpina Holdings is looking to raise S$8.1 million in an initial public offering (IPO) on the Catalist board, as it seeks to expand its service offerings in the integrated facilities management (IFM) segment. Currently, the company provides integrated building services (IBS), mechanical and electrical (M&E) engineering services, and alteration and addition (A&A) works; 99 per cent of its projects between 2018 and the first half of 2021 were contracted by the Singapore government or a public university.
Units of Pegasus Asia closed at S$5.02, up 0.4 per cent or S$0.02 above its initial public offering price of S$5 on its trading debut. The special purpose acquisition company (SPAC) saw more than 2.1 million units changing hands on Friday (Jan 21). Based on the closing price, Pegasus’s market capitalisation would be about S$170.6 million. Pegasus is the second SPAC to be listed on the SGX mainboard. Its listing comes a day after Vertex Technology Acquisition Corporation (VTAC) opened on the exchange on Thursday at S$5.25. VTAC closed up 1 per cent at S$5.05 on Thursday.
The scheme consideration for the proposed merger of Ara Logos Logistics Trust and ESR-Reit has been raised to S$0.097 in cash and 1.7729 in ESR-Reit units for every ALog unit, from S$0.095 in cash and 1.6765 in ESR-Reit units previously. The higher offer works out to a 2.1 and 5.7 per cent rise respectively for the cash and unit portions. The new price tag for the proposed merger is S$0.97 per ALog unit, based on an issue price of S$0.4924 per ESR-Reit unit. The previous consideration was S$0.95 per ALog unit, but based on a higher issue price of S$0.51 per ESR-Reit unit. Units of ESR-Reit had closed flat at S$0.47 on Friday, while ALog units had gained S$0.005 or 0.6 per cent to close at S$0.90.
Goldman Sachs Group economists said they see a risk the US Federal Reserve will tighten monetary policy at every policy meeting from March, a more aggressive approach than the Wall Street bank currently anticipates. The Goldman Sachs economists led by Jan Hatzius said in a weekend report to clients that they currently expect interest-rate hikes in March, June, September and December, and for the central bank to announce the start of a reduction in its balance sheet in July. But they said inflation pressures mean that the “risks are tilted somewhat to the upside of our baseline”, and there is a chance officials will act “at every meeting until the inflation picture changes”. “This raises the possibility of an additional hike or an earlier balance sheet announcement in May, and of more than 4 hikes this year,” the economists said. “We could imagine a number of potential triggers for a shift to rate hikes at consecutive meetings.”
Citigroup has told staff in the New York Tri-State area to start returning to the office from Feb 7, while BNP Paribas is targeting the same date for US staff after recently postponing its return-to-office plans by nearly a month due to the Omicron variant. Wall Street firms were among the first to encourage staff to return to offices, but a winter wave of Covid-19 infections driven by Omicron has forced many to rethink their plans and review their vaccination policies in recent weeks. “With what happened with Omicron, we wanted to go back into a more conservative mode. So we only have people in the office if there’s a business critical need for them to be in,” said Kevin Abraszek, head of HR change and transformation at BNP Paribas in New York.
Digital banking provider Chime Financial Inc has asked Goldman Sachs Group Inc to help it with preparations for an initial public offering in New York, according to people familiar with the matter. The financial technology startup will likely be valued at a substantial premium to its valuation of US$25 billion from an August funding round led by Sequoia Capital, the sources said, adding Chime could aim for a valuation of nearly US$40 billion. A spokesperson for Chime denied that Goldman Sachs was advising the company. Goldman Sachs declined to comment.
Oil prices slid for a second day on Friday, pressured by an unexpected rise in US crude and fuel inventories while investors took profits after the benchmarks touched seven-year highs earlier in the week. However, both crude benchmarks were heading for a fifth straight weekly gain, rising over 1 per cent this week. Prices have risen more than 10 per cent so far this year on concerns over tightening supplies. Brent futures fell 67 cents, or 0.8 per cent, to US$87.71 a barrel by 1.52 pm EST (1852 GMT), while US West Texas Intermediate (WTI) crude fell 58 cents, or 0.7 per cent, to US$84.97. Earlier in the week, both Brent and WTI rose to their highest since October 2014.
Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, CNBC, PSR
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