Daily Morning Note – 26 Aug 2019
WEEKLY MARKET OUTLOOK WEBINAR
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Stocks in Asia slipped Monday morning following an escalation in the U.S.-China trade war late last week.
Stocks in the US plunged on Friday after President Donald Trump ordered that U.S. manufacturers find alternatives to their operations in China. Apple led the way lower.
Meanwhile, Gold surged 2% on Friday as investors interpreted U.S. Federal Reserve Chair Jerome Powell’s speech as leaning towards a dovish monetary policy stance and President Donald Trump’s latest comments exacerbated trade tensions with China.
A day after defending his authority to order US companies out of China, Mr Trump started Sunday by conceding that he was having “second thoughts” about a new round of levies on Chinese goods. Within hours, he abruptly reversed himself again, saying that he only regretted not raising tariffs even higher. On Friday, Trump bumped existing levies to 30% from 25% and planned duties to 15% from 10%. China said it will follow through with tariffs on $75 billion of U.S. goods and vowed to fight the trade war to the end as it prepares for the worst.
Australia‘s biggest banks are expected to cut dividend payments and tap bond markets for more funding to cope with tougher capital requirements as regulators look to safeguard the sector from future market volatility, according to analysts and bankers.
Tensions flared again in Hong Kong as an effort to form a peaceful human chain across the city culminated in police clashes that led to the firing of a weapon and the deployment of water cannons for the first time. In the 12th weekend of disturbances, police and protesters were involved in several violent clashes in the New Territories district.
Singapore-based ride-hailing firm Grab is set to invest “several hundred million dollars” in Vietnam where the company sees its next major growth market, just weeks after it unveiled a $2 billion plan in Indonesia. The proposed investment is the latest example of a top-notch regional brand deepening its commitment to Vietnam, one of Asia’s fastest growing economies. It also shows the eagerness of Grab, which has raised billions of dollars from investors, to put its cash to work.
Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, PSR
Fraser Logistics & Industrial Trust
Recommended Action: Technical BUY
Fraser Logistic and Industrial Trust (SGX: BUOU) broke to the downside in July 2019. Based on the technicals, the trust still has potential for another positive run
Singapore REITs Monthly – Monthly Tracker: August 2019
Recommendation: NEUTRAL (Maintained), Analyst: Natalie Ong
– FTSE S-REIT Index gained +0.4% MTD and +21.7% YTD. Strongest gains from the Healthcare sub-sector (+3.9%) and weakest showing at the Hospitality sub-sector (-2.3%).
– Performance in August: Best performer – Keppel-KBS US REIT (+5.7%), Worst performer – Eagle Hospitality Trust (-10.3%).
– Sector yield spread of 288bps over the benchmark 10-year SGS (10YSGS) yield was at the -1.3 standard deviation (SD) level.
– 3m SOR was flat at 1.75% at 16 August 2019 versus 1.76% at end-July.
– Remain NEUTRAL on S-REITs sector. Sub-sector preferences: Office and Hospitality.
Merck & Co – Bloomberg drugs to drive growth
Analyst: Edmund Xue
– Ramp-up of Keytruda and strong Gardasil sales.
– Higher growth in the China market.
– Bolt-on acquisitions to enhance organic growth.
– We have a TECHNICAL BUY rating for MRK.
Microsoft Corp – Boosted by cloud services and product cycle upgrades
Analyst: Edmund Xue
– Benefit from the ongoing enterprise shift to the cloud.
– Office products to accelerate due to migration to premium offerings.
– Tailwind from 3 product cycles.
– We have a TECHNICAL BUY rating for MSFT.
Golden Energy and Resources Ltd – Ceasing coverage
Recommendation: NEUTRAL (Downgrade), Last Closing Price: S$0.187
Target Price: S$0.19, Analyst: Chen Guangzhi
– Revenue and PATMI missed our expectations due to lower ASP
– 1H19 production completed half of 25mn tonnes FY19 target
– Sluggish coal price due to the market downturn
Webinar Of The Week
Market Outlook: : (PSR) China Aviation (Singapore) Oil, China Everbright Water Limited, CNMC Goldmine Holdings Limited, Dasin Retail Trust, EC World REIT, ComfortDelGro Corp Ltd, Banyan Tree Holdings Limited, US Weekly, China Weekly, Technical Outlook
Date: 19 August 2019
Clients of Phillip Securities can keep updated with Country Strategy and Singapore Sector Reports by logging into: www.poems.com.sg > STOCKS > Research
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