Daily Morning Note – 27 September 2018


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Stocks on Wednesday surrendered earlier gains to close lower after the Federal Reserve raised interest rates by 25 basis points, as widely anticipated, and indicated its intent to tighten once more in December. The Dow Jones Industrial Average fell 106.93 points, or 0.4%, to 26,385.28. The S&P 500 dropped 9.59 points, or 0.3%, to 2,905.97. The Nasdaq Composite Index shed 17.11 points, or 0.2%, to 7,990.37.

Monetary-policy makers unanimously voted to hike the benchmark interest rate by a quarter-point to a range of 2% to 2.25% and predicted another hike by December and three more in 2019. The Fed also dropped the phrase that its policy remains “accommodative.” However, the removal of the word should be taken as an indication that the economy is performing as expected, emphasized Fed Chairman Jerome Powell during the news conference following the Fed’s announcement.

Next up are two key Asian central bank policy decisions, in Indonesia and the Philippines. Both may raise rates, the former to deal with a balance of payments crisis and the latter in response to surging inflation.

Chinese non-financial corporate debt is rising again as a percentage of gross domestic product following a year and a half of deleveraging from its mid-2016 record, according to new data from the Bank for International Settlements. The ratio jumped to 164.1 percent in the first quarter of 2018 from 160.3 percent in the final three months of 2017, erasing more than half of the progress Chinese companies had made in reducing debt loads since the ratio topped out at 166.9 percent in the second quarter of 2016, the BIS data, published Sept. 23, show.

Source: MarketWatch.com


Land Transport Sector – Positives all round

Analyst: Richard Leow

– Maintain Overweight on the Land Transport sector due to positive industry
restructuring and the worst being over for the Taxi industry

– 624 TDVLs issued in August 2018 exceeds the June 2013 historical high of 592

– Average daily Rail ridership for SBS Transit has exceeded 1.2mn, up 24% YoY

– Maintain Accumulate on ComfortDelGro; unchanged target price of $2.78


China will cut import tariffs on goods including machinery, paper, textiles and
construction materials from Nov 1, in a move that would lower costs for consumers
and companies as a trade war with the US deepens.

The Federal Reserve raised the benchmark interest rate on Wednesday for the third
time this year but showed no indication it would be more aggressive in efforts to
head off inflation.

Oil prices eased on Wednesday after US data showed a surprise build in domestic
crude inventories, but an impending drop in Iranian exports kept Brent futures
above US$80 a barrel and on track for a fifth straight quarterly gain.

Uber agreed Wednesday to pay a US$148 million penalty over a massive 2016 data
breach which the company concealed for a year, in the latest effort by the global
ridesharing giant to improve its image and move past its missteps from its early

Source: SGX Masnet, Bloomberg, Reuters, The Business Times, Channel NewsAsia, Phillip Securities Research

Clients of Phillip Securities can keep updated with Country Strategy and Singapore Sector Reports by logging into: www.poems.com.sg > STOCKS > Research

Read the research report(s), available through the link(s) above, for complete information including important disclosures

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