DAILY MORNING NOTE | 27 September 2023

Singapore shares were relatively unchanged on Tuesday (Sep 26), amid declines in the region, inching down 0.01 per cent, or 0.33 point, to close at 3,215.07. Hongkong Land was the top gainer, rising 1.2 per cent or US$0.04 to close at US$3.46. Yangzijiang Shipbuilding was the top decliner, falling 2.9 per cent or S$0.05 to S$1.66. The trio of local banks saw mixed trading on Tuesday. DBS gained 0.2 per cent or S$0.06 to S$33.51, while OCBC climbed 0.3 per cent or S$0.04 to S$12.76. Meanwhile, UOB slipped 0.2 per cent or S$0.05 to S$28.40.

Wall Street stocks resumed their descent on Tuesday, with weak consumer data adding to unease over how elevated interest rates could weigh on growth. The Dow Jones Industrial Average fell 1.1 per cent to 33,618.88. The broad-based S&P 500 tumbled 1.5 per cent to 4,273.53, while the tech-rich Nasdaq Composite Index lost 1.6 per cent at 13,063.61.

SG

DBS’ PayNow service appears to be experiencing delays on Tuesday (Sep 26). Checks by The Business Times found that PayNow transactions initiated from DBS remained pending as at 4 pm. However, DBS accounts could still receive PayNow transactions from OCBC and UOB accounts. In a Facebook post, DBS said the issue was rectified at 4.30 pm.

Singapore Exchange Regulation (SGX RegCo) has issued a directive on Tuesday (Sep 26) for the delisting of Boustead Projects, as the issuer has not ensured that at least 10 per cent of the total number of issued shares are held by the public. In its notice of compliance, the frontline regulator also directed Boustead Projects and/or Boustead Singapore to make an exit offer to the shareholders that is “fair and reasonable”, with the proposal to be provided within one month from Tuesday.

H2G Green said its chief executive officer has been arrested for an offence under the Employment of Foreign Manpower Act, and has surrendered his passport to the Ministry of Manpower (MOM). In a bourse filing on Tuesday (Sep 26), the company said Lim Shao-Lin, who is out on bail, has not been formally charged or convicted in court. He has been requested to attend court on Oct 5. The company called for a trading halt on Tuesday morning, and has requested for it to be lifted on Wednesday.

US

US consumer confidence fell for a second straight month in September amid worries about higher prices and the political environment, a survey showed on Tuesday (Sep 26). The Conference Board said its consumer confidence index dropped to 103.0 this month from an upwardly revised 108.7 in August. Economists polled by Reuters had forecast the index easing to 105.5 from the previously reported 106.1.

The Federal Trade Commission and 17 states on Tuesday sued Amazon, alleging the online retailer illegally wields monopoly power that keeps prices artificially high, locks sellers into its platform and harms its rivals. The federal agency and the states alleged that Amazon violated antitrust laws by using anti-discounting measures that punished merchants for offering lower prices elsewhere. The government also said sellers on Amazon were compelled to use its logistics service if they want their goods to appear in Amazon Prime, the subscription program whose perks include faster shipping times. Such “tying,” the complaint says, illegally “restricts sellers’ choices” and “reduces product selection available to Amazon’s rivals.” The FTC also said sellers feel they must use Amazon’s services such as advertising to be successful on the platform.

ASML plans to set up a base in Japan’s northern island of Hokkaido to support production at a chip plant for Japanese startup Rapidus, the company said on Tuesday (Sep 26). An ASML spokesperson said the company will have a customer support team for Rapidus, but could not immediately confirm staff numbers. Nikkei said that 50 ASML engineers will install an ASML “EUV” machine on a prototype line in Chitose City, Hokkaido. Rapidus is receiving billions of yen in funding from the Japanese government and is aiming to manufacture chips at the 2 nanometre process node, which will require using ASML’s most advanced EUV, or extreme ultraviolet, lithography tools to help create the circuitry of chips.

Cainiao Smart Logistics Network, the logistics arm of Alibaba Group Holding, has filed for its Hong Kong initial public offering, potentially making it among the first of the Chinese ecommerce leader’s units to go public. The first-time share sale could raise at least US$1 billion, people familiar with the matter have said. The Hong Kong exchange confirmed that the company can proceed with its proposed Cainiao spinoff and IPO, according to a filing Tuesday. Alibaba intends to retain more than 50% of the unit’s shares and keep Cainiao as a subsidiary, the filing said.

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

RESEARCH REPORTS

ST Engineering – Tailwinds from higher defence spending, MRO demand

Recommendation: BUY (Initiation) Last Done: S$3.86

Target Price: S$4.50; Analyst: Peggy Mak

– Singapore stepped up defence and security spending by 12% and 17% in FY21 and FY22, respectively. This is expected to rise further, fuelled by heightened geopolitical tensions and cybersecurity threats, providing revenue visibility for STE. Total contracts won for defence and security amounted to S$5.2bn in 1H23, 20.9% higher than the whole of FY22.

– Recovery in air travel will underpin demand for aerospace MRO and components. According to IATA, air passenger-km is still 9.7% below pre-Covid. Asia Pacific’s volume is still 20.3% below, and playing catch-up.

– TransCore’s acquisition is on track to be earnings accretive from 2H23e, we believe, leading to a positive FY23e EBIT for the urban solutions and Satcom division.

– We initiate coverage with a BUY recommendation and discounted cash flow TP of S$4.50.

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