DAILY MORNING NOTE | 24 May 2023

Trade of the Day

NIO Inc. (NYSE: NIO)

Analyst: Zane Aw

(Current Price: US$8.79) – TECHNICAL BUY
Buy price: US$8.79 Stop loss: US$7.70 Take profit: US$10.70

Singapore shares rose 0.2 per cent or 6.99 points to 3,218.08 on Tuesday (May 23) amid improving market sentiment. Across the broader market, gainers beat losers 278 to 254 after 1.3 billion shares worth S$909.9 million were traded. DBS was the top gainer, rising 1.9 per cent or S$0.58 to close at S$31.49. Meanwhile, DFI Retail Group was at the bottom of the table. Its shares shed 3.3 per cent, or US$0.10 to US$2.98. Markets in the region were mixed on Tuesday. Japan’s Nikkei 225 shed 0.4 per cent, while Hong Kong’s Hang Seng Index fell 1.3 per cent and South Korea’s Kospi rose 0.4 per cent.

Wall Street stocks fell on Tuesday on increased worry over uncertain negotiations among Washington power brokers seeking to avoid a US debt default. While the White House pointed to some progress in the latest round of talks with House Speaker Kevin McCarthy, markets are beginning to get more worried about the situation, analysts said. The Dow Jones Industrial Average finished down 0.7 per cent at 33,055.51. The broad-based S&P 500 slid 1.1 per cent to 4,145.58, while the tech-rich Nasdaq Composite Index dropped 1.3 per cent to 12,560.25. Treasury Secretary Janet Yellen has said an agreement must be reached by June 1.

SG

Little Sheep Hong Kong Holdings, which operates hotpot chain Little Sheep, has terminated its franchise agreement with No Signboard Holdings, due to the seafood restaurant operator’s failure to set up the required number of new restaurants under the agreement. In a regulatory filing on Tuesday (May 23), the Catalist-listed No Signboard Holdings said it received a letter of termination from Little Sheep to end the development agreement, which was entered into by both companies on Jun 18, 2018. Under the agreement, which was for a term of 10 years, No Signboard was to have launched one restaurant a year in the first five years.

Singapore is benefiting from the US-China discord in at least one respect: semiconductor sales. China imported US$407 million worth of chipmaking machinery from Singapore in April, the latest Chinese customs data indicated. It was the highest amount since August, rising 9.6 per cent from March and going against the wider trend of diminishing semiconductor exports to China. The country overall imported 27 per cent less in chipmaking gear during April than the prior year. Singapore’s shipments to China of integrated circuit chips increased 3.5 per cent last month compared to March.

Halcyon Agri saw its earnings before interest, taxes, depreciation and amortisation (Ebita) tumble 93.4 per cent to US$1 million in the first quarter ended Mar 31, 2023, from US$15.1 million in the previous corresponding period. “With raw material prices remaining persistently high, the effect of margin compression is more apparent as we are in a low rubber-tapping season that generally ends mid to end-April,” said the natural rubber supplier in a voluntary business update on Tuesday (May 23) evening. Revenue for Q1 fell 20.3 per cent to US$492.2 million, from US$617.3 million a year earlier. This came even as sales volumes for the period nudged up 2 per cent to 309,737 tonnes, from 303,574 tonnes in the year-ago period.

Banks and corporates will now have greater access to, and a better ability to assess and compare, environmental, social and governance (ESG) data from businesses around the world, thanks to an upgraded version of the ESGpedia platform launched on Tuesday (May 23). In particular, it will include a simplified self-assessment tool aimed at lowering the barriers to entry for small and medium-sized enterprises (SMEs). The Singapore-based ESG registry was launched one year ago. It powers Greenprint ESG Registry, one of the four digital utility platforms housed under Project Greenprint, which the Monetary Authority of Singapore (MAS) is developing in partnership with the industry.

S&P Global Ratings on Tuesday (May 23) downgraded its long-term issuer credit rating on Singapore Post (SingPost) to “BBB” from “BBB+”, as weakness in the group’s post and parcel segment may be more prolonged than previously anticipated. The move comes five months after the credit rating agency revised its outlook on the postal service provider to “negative” from “stable”, in view of “intensifying structural hindrances” to the segment and potential sustained earnings weakness. S&P noted in its latest report that SingPost, through its FMH and CouriersPlease businesses, has been focusing more on the Australian logistics market, which is viewed as more competitive compared to SingPost’s traditional postal operations.

In a bid to ramp up Singapore’s solar capacity, JTC has extended its solar deployment programme to privately leased industrial properties “to make solar adoption easy, accessible and with zero capital outlay”. These efforts are aimed at increasing the solar capacity from industrial estates to 900 megawatt-peak (MWp) by 2030, from the current capacity of 225.4 MWp, it said in a statement on Tuesday (May 23). Privately leased industrial properties account for 72 per cent of the total potential solar capacity from industrial estates. Almost 400 companies in JTC’s industrial estates now have solar panels installed on their roofs.

US

Netflix on Tuesday (May 23) expanded its crackdown on password sharing to the United States and more than 100 other countries, alerting users that their accounts cannot be shared for free outside of their households. The streaming video pioneer has been looking for new ways to make money as it faces signs of market saturation, with efforts including limits on password borrowing and a new ad-supported option.

Apple on Tuesday (May 23) said it has entered a multi-billion-dollar deal with chipmaker Broadcom to use chips made in the United States. Under the multi-year deal, Broadcom will develop 5G radio frequency components with Apple that will be designed and built in several US facilities, including Fort Collins, Colorado, where Broadcom has a major factory, Apple said. Broadcom shares were up 4.3 per cent in premarket trading after the announcement. The chipmaker is already a major supplier of wireless components to Apple.

Shutterstock said on Tuesday (May 23) it would buy animated-images platform Giphy from Meta Platforms for US$53 million in cash, months after the Facebook owner had agreed to divest the company on competition concerns. Britain’s competition regulator last year ordered Meta to sell Giphy over fears that it could deny or limit competitors such as Snapchat and Twitter access to the target’s content. Meta had reportedly paid US$400 million for New York-based Giphy in 2020. A year later the deal was challenged by Britain’s Competition and Markets Authority and its successful campaign was the first time a regulator had forced a US tech giant to sell an already acquired company.

S&P Global Ratings cut SoftBank Group’s long-term rating deeper into junk territory on Tuesday (May 23), leading the Japanese tech investment conglomerate to push back against the downgrade. S&P lowered SoftBank’s rating to “BB” from “BB+”, citing its exposure to unlisted companies that are susceptible to changes in the external environment. SoftBank has sold down assets including its stake in Chinese e-commerce giant Alibaba Group Holding to stabilise its balance sheet as the value of its portfolio falters.

Alibaba Group Holding’s cloud division has begun a round of job cuts that could reduce its staff by about 7 per cent, part of an overhaul aimed at preparing the once fast-growing unit for a spinoff and eventual IPO. China’s largest cloud service has begun offering severance to employees or transfers to other parts of the Alibaba empire, a person familiar with the matter said. The moves are intended to streamline the business, which Alibaba aims to fully carve out into a separate company within a year, the person said, asking to remain anonymous discussing internal plans.

Lynk, a carmaker jointly owned by China’s Geely and Volvo Car, plans to open its first showroom in France by early 2024 and to expand in Europe, including Britain, its CEO and founder told Reuters. The automaker, which both sells and rents cars on monthly subscriptions, already has what it calls clubs, which look like bars or lifestyle shops, in Belgium, the Netherlands, Germany, Sweden, Spain and Italy. Lynk, which only offers a Chinese-made hybrid SUV called 01 in black and blue, will launch a fully-electric model, the 02, by the end of 2024, Alain Visser said in an interview.

The World Bank will press for more grants and new capital from member countries, even as it leverages its balance sheet to scale up lending for responses to climate change and other global crises, its managing director of operations said on Tuesday (May 23). The lender will rally donor support for a newly established crisis facility for the world’s poorest countries that face overlapping global crises, including severe climate events, Anna Bjerde said in an interview.

Julius Baer Group posted a weaker boost to business than some analysts had expected amid the turmoil at rival Credit Suisse Group, reporting a 1 per cent gain in assets under management for the first four months of the year. The Zurich-based bank reported net new money of 3.5 billion Swiss francs (S$5.2 billion) by the end of April, with assets under management at 429 billion francs, the bank said in a statement on Tuesday (May 23). The slight increase was partly offset by a negative currency impact, mainly from the strengthening of the Swiss franc against the US dollar, it said.

Yields on US one-month T-bills jumped to a fresh record high in London trade on Tuesday (May 23) as concerns about the United States hitting its debt continued to weigh on financial markets. US President Joe Biden and House Speaker Kevin McCarthy could not reach an agreement on Monday on how to raise the government’s debt ceiling but vowed to keep talking. There are less than two weeks before Jun 1, when the US Treasury Department has warned that the federal government could be unable to pay all its debts.

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

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