DAILY MORNING NOTE | 27 July 2022
US equity futures rallied Wednesday after resilient earnings from Google parent Alphabet Inc. and an upbeat outlook from Microsoft Corp. helped to salve investor sentiment somewhat.
Contracts on the tech-heavy Nasdaq 100 added about 1.5%, while those for the S&P 500 were up more than 0.5%.
That followed a slide in the US stock market ahead of a much anticipated Federal Reserve interest-rate increase that’s feeding into concerns about a rapidly slowing global economy.
Shares in Asia look set for a choppy start as investors weigh the cross-currents. Futures for Japan, Australia and Hong Kong pointed lower.
Treasury yields and the dollar pushed higher in the Wall Street session ahead of the 75-basis-point Fed hike markets expect Wednesday. Oil hovered around $96 a barrel and Bitcoin was subdued near $21,000 after a selloff this week.
Stocks to watch: Hwa Hong
Hwa Hong’s directors have announced their decision to accept Sanjuro United’s revised offer of S$0.40 per share for their stakes in the company. In a bourse filing after market close on Tuesday (Jul 26), Hwa Hong directors Ong Eng Loke, Ong Eng Hui David, Ong Eng Keong and Ong Mui Eng – known as the current Ong directors – announced their intention to sell the approximately 29.3 per cent stake in the company to offeror Sanjuro United. The move will turn the Sanjuro United offer unconditional.
An indirect subsidiary of property firm KSH Holdings has won the tender for Euro-Asia Apartments in Serangoon, which was put up for collective sale last month, according to an exchange filing on Tuesday (Jul 26). KSH Ultra Unity (KSHUU), KSH’s indirect 49 per cent-owned associated company, won the bid for the 84-unit development at 1037 Serangoon Road at the purchase price of S$222.18 million. This is slightly above the guide price of S$218 million, when the 10-storey block of apartments was put up for sale on Jun 1, its second attempt at doing so.
The manager of Frasers Centrepoint Trust (FCT) on Tuesday (Jul 26) reported a slight dip in retail portfolio committed occupancy for the third quarter ended Jun 30, but said shopper traffic had reached about 79 per cent of pre-pandemic levels. Occupancy in Q3 was 97.1 per cent, down from 97.8 per cent in the previous quarter. The manager said this was largely due to pre-termination by an anchor tenant, adding that “advanced negotiations” with replacement tenants are ongoing. However, portfolio tenants’ sales rose 23 per cent year on year and now average about 10 per cent above pre-Covid-19 levels, the manager said, with sales led by Tampines 1 and Waterway Point.
Mainboard-listed OUE Commercial real estate investment trust (Reit) on Monday (Jul 25) reported a 12.2 per cent fall in H1 2022 distribution per unit (DPU) to S$0.0108 from S$0.0123 in the year prior. The fall in DPU was driven by lower H1 2022 net property income which fell 14.2 per cent to S$93.6 million from S$109 million in H1 2021. The fall was attributed to the divestment of 50 per cent interest in OUE Bayfront on Mar 31, and was partially offset by lower rental rebates and other support measures compared to H1 2021. This led to a 13.3 per cent drop in H1 2022 revenue to S$115.8 million from S$133.5 million a year ago. The amount available for distribution in H1 2022 also shrank 11.4 per cent to S$59.5 million from S$67.2 million in H1 2021.
Singtel is divesting Amobee to the UK’s Tremor International for an enterprise valuation of US$239 million, above the US media and advertising subsidiary’s carrying value of US$160 million. The transaction, which excludes Amobee’s e-mail solutions business, will realise some US$197 million in net proceeds and is expected to complete by September this year.
The manager of Keppel REIT has reported a distribution per unit (DPU) of 2.97 cents for the 1HFY2022 ended June, 1.0% higher than the DPU of 2.94 cents posted in the corresponding period the year before. The number of units in the REIT in issue during this period stood 1.23% higher y-o-y at 3.72 billion. During the period, the REIT’s property income increased by 3.7% y-o-y to $109.8 million. Net property income (NPI) increased by 6.0% y-o-y to $89.5 million, while NPI attributable to unitholders increased by 6.6% y-o-y to $81.0 million. The higher property income and NPI were mainly attributable to the contribution from Keppel Bay Tower, which was acquired on May 18, 2021, as well as the higher NPI from the REIT’s Ocean Financial Centre, 8 Exhibition Street and Pinnacle Office Park.
Microsoft missed estimates for quarterly revenue on Tuesday (Jul 26), hurt by a stronger dollar, slowing sales of PCs and lower advertisement spending. Shares of the Redmond, Washington-based company fell about 1 per cent in trading after the bell. The stock has lost about 25 per cent this year. Microsoft also faces pressure from a stronger greenback as it gets about half of its revenue from outside the United States. That led the company to lower its fourth-quarter profit and revenue forecasts in June.
US renewable-power installations fell to an almost 3-year low, as trade disputes, uncertain federal policy and supply-chain snarls complicate President Joe Biden’s bid to green the nation’s power system. Clean-energy installations in the second quarter plummeted 55 per cent from the same period in 2021, according to a report on Tuesday (Jul 26) by the American Clean Power Association, a Washington-based industry group. It was the lowest quarter for clean-energy capacity additions since the third period of 2019. Solar deployments were down 53 per cent from the second quarter of last year, and onshore wind was 78 per cent lower.
The US central bank opened its two-day policy meeting on Tuesday (Jul 26), preparing for another salvo in the war on rising inflation. The Federal Reserve is expected to announce another big interest rate increase on Wednesday, the fourth this year, in the effort to tamp down price pressures that have been squeezing American families. The challenge for policymakers is to quell inflation before it becomes dangerously entrenched, but without sending the world’s largest economy into a recession that would reverberate around the globe.
US consumer confidence declined in July to the lowest level since February 2021 on dimmer views of the economy amid persistent inflation. The Conference Board’s index decreased for a third month to 95.7 from a downwardly revised 98.4 reading in June, data on Tuesday (Jul 26) showed. The median forecast in a Bloomberg survey of economists called for a decline to 97. The steady weakening in sentiment risks causing consumers to cut back on discretionary purchases at a time when the economy is struggling for momentum. Inflation has dented confidence and forced the Federal Reserve to pursue aggressive interest-rate hikes geared at curbing demand.
A key regulatory panel will delay consideration of a broad stablecoin regulation Bill for several weeks amid banking industry pushback and late tweaks to certain provisions, according to sources familiar with the matter. Compromise legislation being drafted by Democratic and Republican leaders of the US House Financial Services Committee likely will not be considered by the panel until September, as efforts to advance the measure before the month-long August congressional break faltered. Part of the delay is due to changes sought by the US Treasury Department, which generally supports the Bill but wanted stricter consumer protections tied to wallets where people would hold their digital assets, according to one source familiar with the matter.
Mcdonald’s on Tuesday (Jul 26) reported comparable sales and profit above market expectations even as expenses soared, as the burger chain benefited from steady online demand, new product launches and higher prices. The burger chain’s global same-store sales jumped nearly 10 per cent in the second quarter compared with expectation of a 6.5 per cent rise. Faced with higher labour and ingredients expenses, US restaurants have been raising prices of pizzas, burritos and hamburgers. Despite that sales have held up even as consumers grapple with higher prices of gas and everyday essentials. With increasing evidence of a pullback in consumer spending, chief executive Chris Kempczinski said, “the operating environment across the competitive landscape remains challenging.”
Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, CNBC, PSR
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