DAILY MORNING NOTE | 25 March 2024

Trades Initiated in the past week


Week 13 equity strategy: Last week, central banks took the spotlight. The Federal Reserve kept interest rates unchanged but maintained the view that they still intend to cut rates three times this year. This was despite much stronger economic projections (2024 GDP: 1.4% to 2.1%) and recent stubborn inflation. We think the market was relieved that the Fed was not spooked by the higher inflation over the past two months. Powell viewed inflation to be moving down gradually and said it can be a “bumpy path”. So the bumpy path comment saved the markets. Our base case is two rate cuts in 2H24. The US economy is just flatlining despite aggressive fiscal spending (2024: US$1.6tr deficit). Data points such as industrial production, retail sales and PMI are all sluggish.

Another central bank in the headlines was the Bank of Japan (BOJ). The BOJ raised rates to 0-0.1% (prev. -0.1%) and removed the previous 1% target yield for the 10-year bond. It is a minuscule tightening. The yen will remain weak as the rate differential with the US is a huge 3.5% point. And monetary policy remains extremely loose with a negative real interest rate that is still rising to 2% (vs US +0.5%). The tail risk for Japan is a negative spiral of a weak yen, leading to higher inflation and a spike in interest rates. This will slow the economy leading to further weakness in the currency. This risk is mitigated as BOJ can intervene in the currency market with its US$1.29tr foreign currency reserve.

We recently spent two days in Jakarta visiting Siloam International hospitals. The hospitals were packed with people and equipped with modern equipment and well-furnished. Indonesia faces a shortage of specialists. The key for the hospital is to attract specialists with modern equipment and patient flow. Siloam cracked this chicken and egg problem by investing early and aggressively in hospitals since 2011. We see a perpetuating loop of specialists, equipment and patients. Macro drivers for healthcare demand are the growing population, rising chronic diseases, expanding middle income and spread of health insurance.

Paul Chew
Head of Research

The rally fuelled by the US Federal Reserve’s commitment to cut rates did not carry over from Thursday (Mar 21), causing Singapore shares to close little changed on Friday despite overnight rally in the US and European markets. Stocks dipped 0.07 per cent or 2.4 points to 3,217.97 for the day, but fared better for the week with a 1.4 per cent or 45.01 point increase. Of the three counters contributing to over 40 per cent of the market barometer, DBS +0.48% was the one banking stock that rose, by 0.5 per cent or S$0.17 to S$35.83. In contrast, OCBC -0.29% declined 0.3 per cent or S$0.04 to S$13.60 and UOB -0.51% fell 0.5 per cent or S$0.15 to S$29.07.

The Nasdaq edged to a fresh record while the Dow pulled back on Friday (Mar 22), as US stock markets took a breather after two buoyant sessions following mixed corporate earnings. All three indices finished at records the last two days, on the back of Wednesday’s Federal Reserve meeting. But major indices have since had a more subdued performance, suggesting some profit taking. The Dow Jones Industrial Average dropped 0.8 per cent to 39,475.90, retreating from a serious drive at the 40,000-point level. The broad-based S&P 500 slipped 0.1 per cent to 5,234.18, while the tech-rich Nasdaq Composite Index climbed 0.2 per cent to 16,428.82, a third straight record close.

Top gainers & losers


Events Of The Week



Four directors of Cordlife Group along with its former group chief executive, Tan Poh Lan, have been arrested by the Commercial Affairs Department (CAD) and then released on bail. On Friday (Mar 22), the troubled cord-blood bank said this was related to alleged breaches-of-disclosure obligations by Cordlife on the matter of irregular temperatures in a certain cryogenic storage tank, first disclosed by the group on Nov 30, 2023. The four directors are acting chairman Ho Choon Hou, independent directors Yeo Hwee Tiong and Titus Cheong, and non-independent, non-executive director Chow Wai Leong.

Singapore Airlines will suspend flights to Chengdu and Chongqing from March 31, just over four months after flights to the two Chinese cities resumed. Chongqing-based aviation industry sources claim the suspension is due to the airline not having obtained approval from the Civil Aviation Administration of China (CAAC) to continue flying to the two cities in the 2024 summer and autumn seasons. SIA currently operates daily flights to Chengdu and thrice-weekly flights to Chongqing. SIA’s services between Singapore and Chongqing, Chengdu, Shenzhen and Xiamen were also suspended in 2023 for regulatory reasons. Flights to the four cities subsequently resumed from Nov 26, 2023.

Investors have responded positively to Singapore Post strategic review, which outlined a clear objective of becoming a tech-driven, pure-play logistics enterprise with a significant presence in Australia within three years. As SingPost grappled with the structural decline of its former core business of delivering domestic mail, its share price has dropped by more than half in the last five years.


The US dollar headed towards a second week of gains on Friday (Mar 22), after a slight rate hike in Japan gave the yen a slight reprieve and a surprise cut in Switzerland highlighted the gap in interest rate policy between the Federal Reserve and other central banks. The week marked a shift in global monetary policy as the Swiss National Bank and central banks in developing countries cut rates or indicated their intention to do so, with June the likely moment for the European Central Bank to move. The dollar rose against all G10 currencies except the yen, as the relatively strong US economy and high interest rates kept the carry trade alive. But the Swiss rate cut, the first by a major central bank in Europe, marked a definitive shift.

US President Joe Biden signed a US$1.2 trillion funding package that keeps the US government running till Sep 30, averting a partial shutdown. The White House announced the signing on Saturday (Mar 23) after the US Senate approved the package in the early morning hours. That ended a partisan tug-of-war, marked by repeated infighting among Republicans over amendments. With a midnight deadline looming, Senate leaders beat back efforts by conservative Republicans to enact deep spending cuts and restrictions on migration. Biden applauded passage of the funding package, but also prodded lawmakers to approve assistance for Ukraine, Israel and Indo-Pacific allies that has been stalled for months, as well as a measure that would tighten security at the US-Mexico border.

Walt Disney Co on Friday (Mar 22) said that remarks by activist investor Nelson Peltz criticising the company for making movies dominated by female and Black actors is evidence that he shouldn’t be on Disney’s board. Peltz, whose fight to join Disney as a director has become one of the year’s most bitter and closely watched board battles, in an interview with the Financial Times said Disney’s films have become too focused on delivering a message, and not enough on quality storytelling. He specifically took issue with The Marvels and Black Panther.

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


Thomson Medical Group – Building a regional healthcare footprint

Recommendation: BUY (Initiation); Last Done: S$0.052

Target Price: S$0.066; Analyst: Peggy Mak

  • The 70%-owned listed TMC Life Sciences Bhd is recording record earnings and growth from an increase in beds, higher patient load and larger bill size. It has grown its pool of domestic and foreign patients, drawn by improved service standards, relatively lower costs, and weak Ringgit.
  • Earnings contribution from Franco-Vietnam Hospital, acquired at end 2023, will more than offset the absence of government contract for Covid-related work in Singapore. FV extends its geographical reach to a population of 120mn people in Vietnam, Cambodia, and Laos.
  • We estimate the development of the Iskandar landbank could yield a development gain of S$1.1bn. The value of real estate could rise with the completion of the railway link between Singapore and Johor Bahru and the setting up of a free trade zone in the area. We initiate coverage with a BUY recommendation and SOTP TP of S$0.066.

First REIT – Virtuous cycle in Indonesia healthcare

Recommendation: Not rated; Last close: S$0.245; Analyst Paul Chew

  • We visited First REIT’s four hospitals in Jakarta operated by Indonesia-listed Siloam International Hospitals [Rp2,270, Not Rated]. The hospitals were bustling with activity, well equipped, nicely furbished and offered advanced specialist care including neurology, oncology, gastropathy, urology and fertility.
  • Indonesia faces an acute shortage of specialists. Specialists are drawn to modern healthcare equipment and patients. Investing early in private hospitals allowed Siloam to establish a reputation and location that draws patients. It has around 20 hospitals that are a decade old. With the patient flow, it can invest in more sophisticated equipment, which in turn attracts more specialists and patients. A perpetuating loop of specialists, equipment and patients is created.
  • First REIT collects rent from Indonesia hospitals in rupiah from the higher of 4.5% annual or performance rent which is 8% of gross operating revenue in the preceding year. In FY23, rental growth in rupiah terms rose 7.6%, of which three hospitals were at performance rent. Rental income from Indonesia could grow faster in FY24 as Siloam revenue expands 18% YoY in 9M23. The four macro drivers for healthcare demand are the growing population, the rising rate of chronic diseases, expanding middle income and the spread of health insurance.

US Banks – Industry leaders to benefit from peak rates
Initiation on the US Banking sector:

1)    BUY on JP Morgan Chase & Co (TP: US$231.19)
2)    ACCUMULATE on Bank of America Corporation (TP: US$40.82)
3)    ACCUMULATE on Wells Fargo & Company (TP: US$60.83)

Analyst: Glenn Thum

  • JP Morgan, Bank of America and Wells Fargo are leaders in the US banking sector, with 40% of total assets and 32% of total deposits.
  • Peak rates will boost the banks’ funding costs, as loan and security repricing is set to overtake deposit repricing. This shift will drive net interest income going forward. Credit losses have normalised to pre-pandemic levels with no alarming credit deterioration, and specific reserves for commercial real estate losses have been set aside.
  • Initiate coverage on JP Morgan Chase & Co (BUY; TP US$231.19), Bank of America Corporation (ACCUMULATE; TP US$40.82) and Wells Fargo & Company (ACCUMULATE; TP US$60.83).

PSR Stocks Coverage



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