Daily Morning Note – 26 April 2022
Wall Street rose on Monday, with the Nasdaq ending sharply higher after Twitter agreed to be bought by billionaire Elon Musk, sparking a late day rally in growth stocks. The S&P 500 traded in negative territory for much of the session but extended gains after Twitter’s announcement. The S&P 500 growth index (.IGX) ended up over 1%, also bouncing back from an earlier decline. The Dow Jones Industrial Average (.DJI) rose 0.7% to end at 34,049.46 points, while the S&P 500 (.SPX) gained 0.57% to 4,296.12.
Oil falls below US$97 as China’s lockdowns imperil demand outlook. West Texas Intermediate futures slid as much as 6.2 per cent, falling below the key US$100 level on Monday (Apr 25). Rising coronavirus cases in Beijing sparked jitters about an unprecedented lockdown of the capital, while Shanghai reported record daily deaths over the weekend. Demand is down 1.2 million barrels a day since the lockdowns in Shanghai began, and a shutdown of the capital could impact demand even more so, he added. Potential demand destruction from China lockdowns “is the number one issue in the market right now,” said Bob Yawger, director of the futures division at Mizuho Securities USA. China has implemented lockdowns in a number of cities as it pursues a Covid Zero strategy. In Beijing, the government has expanded testing to 12 districts from Apr 26-30. China, the world’s biggest importer of liquefied natural gas, is trying to sell some spare supply due to fears that demand-sapping virus lockdowns could spread from Shanghai to other parts of the country.
SG
Morgan Stanley Private Equity to acquire 59.8% stake in APAC Realty for S$129.5m from from an entity controlled by private equity firm Northstar Group. The total consideration for the stake is around S$129.5 million – or S$0.61 per share – and the offeror also intends to make an unconditional mandatory general offer for all the outstanding shares in APAC Realty, other than those already owned, controlled or agreed to be acquired by it, according to the bourse filing on Monday (Apr 25). The offeror is making the offer in compliance with the requirements of the Singapore Code on Take-overs and Mergers. The S$0.57 offer price represents a discount of 30.1 per cent to the last traded share price of S$0.815 on Friday (Apr 22). It is also a 26.8 per cent discount to the volume weighted average price per share of S$0.779 for the one-month period prior to and including Apr 22. The offeror’s present intention is to “acquire as many shares as possible under the offer”. In the event that the trading of the shares on SGX is suspended due to a loss of free float, the offeror intends to delist the company.
Singapore inflation hits decade highs in March as consumer prices surge by 5.4% – a high not seen since April 2012 – as the cost of food, services, private transport and accommodation all rose. “With private transport and accommodation inflation expected to stay firm in the near term, headline inflation will pick up by more than core inflation this year,” the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) said jointly on Monday (Apr 25). The authorities also reiterated that core inflation should moderate towards the year-end as some external pressures recede, but warned that “there remain upside risks to inflation from the recent geopolitical and pandemic‐related shocks”. The all-items consumer price index (CPI) reading picked up strongly from 4.3 per cent in February, and came in well ahead of the median forecast of 4.7 per cent in a Bloomberg poll. Core inflation, which excludes accommodation and private transport costs, was up to 2.9 per cent, from 2.2 per cent in February. Core inflation last touched 2.9 per cent in March 2012.
The manager of OUE Commercial Real Estate Investment Trust (OUE C-Reit) said on Monday (Apr 25) that the Reit has priced its offering of S$100 million 4.2 per cent notes due 2027. In a bourse filing, the manager said the notes will be issued at an issue price of 100 per cent their principal amount, and will bear interest at the rate of 4.2 per cent per annum. The net proceeds will be used for refinancing existing borrowings, general corporate funding and/or other general working capital purposes of OUE C-Reit and its subsidiaries. If any of the rating agencies – S&P, Moody’s or Fitch – assigns an investment grade rating to both OUE C-Reit and the notes within 18 months of the issue date of the notes, the 4.2 per cent rate will be stepped down to 3.95 per cent. The interest rate would step back up to 4.2 per cent if a rating of OUE C-Reit and/or the notes is withdrawn by all the rating agencies that have previously assigned ratings or if the investment grade rating for both the Reit and the notes are not maintained.
Market uncertainties could hit crude palm oil (CPO) price, companies’ H2 earnings; gradual price decline expected. CPO prices have been kept at elevated levels so far this year, but the numerous uncertainties in the industry mean investors need to keep a close eye on palm oil stocks’ earnings for H2. A confluence of factors such as tight supply, bad weather conditions, the spike in crude oil prices, as well as geopolitical tensions, have kept prices at higher levels. In H2, investors should brace for volatility in the commodity’s prices, and a correction in prices could well be in the pipelines. The key headwinds for the sector include demand rationing activities that have surfaced on the back of high prices which could in turn affect sales volumes, rising costs in terms of fertiliser, logistics and labour, as well as ESG (environment, social and governance) issues that are weighing on planters.
US
Elon Musk clinched a deal to buy Twitter Inc (TWTR.N) for $44 billion cash on Monday in a transaction that will shift control of the social media platform populated by millions of users and global leaders to the world’s richest person. It is a seminal moment for the 16-year-old company that emerged as one of the world’s most influential public squares and now faces a string of challenges. Discussions over the deal, which last week appeared uncertain, accelerated over the weekend after Musk wooed Twitter shareholders with financing details of his offer. Under pressure, Twitter started negotiating with Musk to buy the company at the proposed $54.20 per share price.
Blackstone agreed to buy PS Business Parks for about US$7.6 billion, expanding its bets on real estate across the US. Affiliates of Blackstone Real Estate will buy Glendale, California-based PSB for US$187.50 a share in cash, according to a statement on Monday. The price is roughly a 12 per cent premium to PSB’s closing price on Friday. Under the deal, Blackstone agreed to take over approximately 27 million square feet of industrial and office properties, business parks and rental housing properties located in California, Miami, Texas and Northern Virginia. Shares of PS Business Parks surged Monday. The stock was up 12 per cent at $187.96 of 9.40 am Blackstone slipped as much as 3.6 per cent to $106.66.
Coca-Cola beat quarterly revenue and profit expectations on Monday (Apr 25), helped by higher prices and a rebound in demand for its sodas at theaters and restaurants. Consumer goods companies have raised prices in the face of soaring costs of ingredients like coffee and sugar, as well as a surge in labor and transportation expenses. But demand has been resilient as consumers coming out of pandemic curbs spend more. Analysts and companies have warned that demand could slow as the Ukraine war and Indonesia’s ban on palm oil exports result in higher global food prices. The company said suspension of its operations in Russia would impact its annual profit by 4 cents per share and annual net revenue by about 1 per cent to 2 per cent. However, it left its forecast for annual comparable earnings per share growth unchanged at 5 per cent to 6 per cent. Net revenue rose 16 per cent to US$10.5 billion in the first quarter. Analysts had expected revenue of US$9.83 billion, according to Refinitiv data.
Meta Platforms is set to open its first physical store where shoppers can try out and buy virtual reality headsets and other gadgets as the company plots a course to take its highly touted metaverse mainstream. The 1,550-sq ft Meta Store at the company’s Burlingame campus in California opens on May 9, and will feature demos for its Quest 2 VR headset and video calling device Portal as well as Ray-Ban’s augmented reality (AR) glasses, Meta said on Monday (Apr 25). The devices, except for the Ray-Ban glasses, will be available for purchase at the store. The products can also be bought online through a new shopping tab on meta.com, the company said.
ByteDance hired Julie Gao from international law firm Skadden as its new chief financial officer, filling a position that has largely been vacant throughout the social media giant’s decade-long history. Gao, who counselled tech companies on initial public offerings (IPO) and other types of financing, will work out of ByteDance’s offices in Hong Kong and Singapore, chief executive officer Liang Rubo said in an internal memo seen by Bloomberg News. A ByteDance spokesperson confirmed Gao’s hiring. The announcement will likely revive speculation about ByteDance’s potential IPO, which could be one of the largest Chinese tech debuts in years. But the spokesperson reiterated on Monday (Apr 25) that the company is not ready for a debut.
Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, CNBC, PSR
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Date: 25 April 2022
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