Daily Morning Note – 27 July 2020


U.S. stock futures slipped on Sunday night as investors braced for a big week of corporate earnings and lawmakers continued coronavirus stimulus negotiations.

Dow Jones Industrial Average futures traded 60 points lower, or 0.2%. S&P 500 futures fell 0.2% along with Nasdaq 100 futures.

McDonald’s, Pfizer, Alphabet, Apple and AMD are among the companies slated to release their latest quarterly figures this week.

Through Friday’s close 128 S&P 500 companies had reported earnings, with 81% beating analyst expectations, according to Refinitiv. However, overall S&P 500 earnings have fallen more than 40% from the year-earlier period as the coronavirus pandemic takes a big bite out of corporate profits.


A new index focused on China’s technology giants is set to give investors greater access to their growing dominance in Hong Kong’s market. The new index will track the 30 largest tech companies listed in the city. The Hang Seng Tech Index will include Tencent Holdings, Alibaba Group Holding, Meituan Dianping and Xiaomi. The gauge would have achieved returns of 36.2 per cent for 2019 and 35.3 per cent for the first half of this year, according to compiler Hang Seng Indexes.

An Indian court has summoned Alibaba and its founder Jack Ma in a case in which a former employee in India says he was wrongfully fired after objecting to what he saw as censorship and fake news on company apps, documents seen by Reuters showed. The case comes weeks after India cited security concerns in banning Alibaba’s UC News, UC Browser and 57 other Chinese apps after a clash between the two countries’ forces on their border.

London-based HSBC bank has denied Chinese media reports that it had “framed” telecom giant Huawei or “fabricated evidence” that led to the arrest of a top company official. Washington‘s investigations into Huawei – for allegedly violating US sanctions on Iran – started before the bank’s involvement with the company in late 2016, the lender said Saturday in its first public comments on Huawei’s legal battle in North America.

China‘s soybean imports in June from top supplier Brazil soared to a record high, according to customs data released on Sunday, driven by growing demand for soybeans as China’s pig herd recovers after deadly outbreaks of African swine fever.

Koh Brothers Group and its Catalist-listed subsidiary Koh Brothers Eco Engineering both expect to report a net loss for the six months ended June 30, owing to the adverse impact of Covid-19, they said on Friday.

Food manufacturer QAF said on Saturday that the meat processing unit of its Australian pork production business Rivalea has temporarily shut down its processing plant in Laverton, Melbourne with immediate effect. Rivalea’s 80 per cent-owned meat processing subsidiary, Diamond Valley Pork (DVP), shut its processing plant after five employees at the plant recorded positive Covid-19 test results.

Chinese electric vehicle maker Li Auto, backed by food delivery giant Meituan Dianping, has launched an initial public offering (IPO) of up to US$950 million, in one of the biggest US listings by Chinese companies this year. The five-year-old automaker, formerly known as CHJ Automotive, is selling 95 million American depositary shares (ADS) at an indicative range of US$8 to US$10 per share, according to its updated prospectus filed with the US Securities and Exchange Commission on Friday.

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


Technical Analysis: DXY & Gold update – Low interest rate environment set the tune for the precious metal

Analyst: Chua Wei Ren

Recommended Action: Technical BUY

– The U.S Dollar index fell further by breaking below the 95.00 support level.

– Further downside of the dollar to be seen as the world is battling the ongoing COVID-19 pandemic.

– The European Union has agreed on a €750bn recovery fund which sees the EUR soaring above 1.16 against the dollar.

– Gold has overcome all obstacles by trading above US1,900 before Friday’s market close.

– With dollar weakening, safe haven asset such as Gold will continue to maintain its bullish outlook.

>> Read more technical reports


CapitaLand Commercial Trust – Value-add beyond mere workstation

Recommendation: ACCUMULATE (Maintained), Last Done: S$1.72

Target Price: S$1.91, Analyst: Natalie Ong

– 1H20 NPI (-4.5%) and portfolio metrics were relatively stable. Occupancy was unchanged at 95.2% while valuations fell 1.7%.

– 1H20 DPU of 3.34 cents was 24.1% lower YoY and formed 43.5% of our FY20e DPU estimates, deemed in line considering the $7.5mn retained on the RCS level.

– Maintain ACCUMULATE, unchanged TP of $1.91. No change in our estimates. CCT offers a FY20e/21e DPU yield of 4.5%/5.3%.

Ascendas REIT – Worth the price tag

Recommendation: ACCUMULATE (Maintained), Last Done: S$3.48

Target Price: S$3.63, Analyst: Natalie Ong

– 1H20 DPU of 7.27 cents formed 44.4% of our FY20e DPU.

– Positive rental reversions of 4.3% for 2Q20 amidst a more cautious leasing backdrop.

– Diversified and stable portfolio, with out-of-pocket rebates totaling c.2% of FY20e revenue. Well-positioned for acquisition – low cost of borrowing maintained and P/NAV at a premium (1.6x).

– Maintain ACCUMULATE with a higher TP of S$3.63 (prev $3.29) mainly due to a lower beta assumption, which lowered our cost of equity from 6.45% to 6.0%. We adjust our estimates to reflect the acquisition of the 25% stake in Galaxis and the acquisition of the Australian logistic asset at Kiora Crescent.

Frasers Centrepoint Trust – The road to recovery

Recommendation: ACCUMULATE (Maintained), Last Done: S$2.39

Target Price: S$2.69, Analyst: Natalie Ong

– Portfolio occupancy fell by 1.5ppts QoQ and 2.2ppts YoY to 94.6%; only 4.8% of NLA left for renewal for FY20.

– Shopper traffic for the second week of July improved to 61.1% of last years’ levels, from 48.2% as of end-June, 95% of tenants are currently operating.

– Maintain ACCUMULATE with a higher TP of $2.69 (prev. $2.61). We tweak our forecast to incorporate the additional 12.07% stake in PGIM ARF which was completed on 6 July 2020 as well as the loan facilities which were drawn down. DPU yield for FY20e/FY21e stands at 4.1%/5.9%.

SG Bonds Weekly – Week of 27 July 2020

Credit Analyst: Timothy Ang

– Last week, Asian USD corporate bond spreads rallied >5% on strong recovery in the Chinese property sector.

– This week will be eventful in the US, with the FOMC meeting on Thursday morning and subsequently the release of US GDP data later in the week.

– USD1t stimulus proposal by US Republicans may be announced in the week

>> Read more research reports

HK Reports – Read up on our Hong Kong reports here


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Market Outlook: Market Outlook: SG Banking Monthly, SG Bonds Weekly and SG Strategy 3Q20 (with stock picks)

Date: 06 July 2020

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Phillip Research in 3 minutes: #24 – Hyphens Pharma International Ltd; Initiation

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