DAILY MORNING NOTE | 3 April 2023

Local shares ended the previous week on a slightly more upbeat note alongside other markets in the region, as worries over the banking crisis and inflation levels eased. Advancers trumped decliners 346 to 213, after two billion securities worth a total of S$1.4 billion changed hands. The trio of lenders were among the top losers on Friday. DBS fared the worst – shedding 1.5 per cent or S$0.50 to S$33.00. UOB lost 0.3 per cent or S$0.08 to S$29.76, while OCBC was down 0.2 per cent or S$0.02 to S$12.37. Sembcorp Marine was the most actively traded stock on Friday, rising 3.5 per cent or S$0.004 to S$0.119 after about 784.8 million shares changed hands.

Wall Street stocks rallied on Friday (Mar 31), concluding a winning first quarter on a positive note on signs of moderating inflation and receding fear over bank industry instability. The Dow Jones Industrial Average finished up 1.3 per cent at 33,274.15. The broad-based S&P 500 gained 1.4 per cent to 4,109.31, while the tech-rich Nasdaq Composite Index jumped 1.7 per cent to 12,221.91.

SG

Property giant City Developments Ltd (CDL) has raised its expected cost of climate inaction to S$120 million in 2030, 1.5 times its previous estimate of S$82 million from two years ago. The new estimate represents about 6.4 per cent of CDL’s 2022 operating profit of S$1.9 billion. It reflects the expected cost that the group would face if it waited until 2030 to start addressing the physical and transition risks of climate change, assuming global warming is limited to 1.5 deg C above pre-industrial levels.

DBS has set up a special board committee to look into the cause of the disruption to its digital banking services on Wednesday (Mar 29), the lender said at its annual general meeting (AGM) on Friday. MAS previously imposed additional capital requirements amounting to about S$930 million on DBS that were related to the November 2021 disruption. Shares of DBS closed 1.5 per cent or S$0.50 lower at S$33.00 on Friday.

SIA Engineering Company has inked a S$120.8 million agreement with Scoot, to provide the budget carrier with maintenance, repair and overhaul and fleet management support services. The agreement will commence on Apr 1. It has a term of two years, with the option for an extension of one additional year, SIAEC said in a bourse filing on Friday (Mar 31). If extended, the agreement is expected to yield a labour revenue of S$120.8 million over the three-year term.

US

Tesla on Sunday (Apr 2) missed estimates for first-quarter deliveries as rising competition and a bleak economic outlook overshadowed the electric-vehicle (EV) maker’s efforts to prop up demand with price cuts. Tesla deliveries were 36 per cent higher than a year ago, but below the 52 per cent growth rate that was projected by chief executive Elon Musk early this year. Shares have fallen since Tesla’s investor day on Mar 1 when Musk said little about how soon the EV maker might launch a more affordable, mass-market vehicle.

Saudi Arabia and other Opec+ oil producers on Sunday (Apr 2) announced further oil output cuts of around 1.16 million barrels per day The pledges bring the total volume of cuts by Opec+, which groups the Organization of the Petroleum Exporting Countries with Russia and other allies, to 3.66 million bpd, equal to 3.7 per cent of global demand. Sunday’s development comes a day before a virtual meeting of an Opec+ ministerial panel, which includes Saudi Arabia and Russia, and which had been expected to stick to 2 million bpd of cuts already in place until the end of 2023.

Deposit at all US commercial banks fell in the previous week ended Mar 22 to their lowest since August, but at a slower rate than the week before, and stabilised at small lenders seen as more vulnerable to outflows after the failure of Silicon Valley Bank (SVB). Data released on Friday (Mar 31) by the Federal Reserve showed the US$125.7 billion drop in deposits at all US banks in the week ended Mar 22 was roughly US$50 billion less than the record US$174.5 billion outflows in the first week after the collapses of Silicon Valley Bank and Signature Bank. Still, that left overall deposits nearly US$860 billion below their record high from last April, with more than a third of that drop — about US$300 billion — occurring in the weeks since the collapse of SVB on Mar 10 and Signature two days later.

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

RESEARCH REPORTS

Phillip 2Q23 Singapore Strategy – More patient than the Fed

Analyst Paul Chew

– After an encouraging 3.5% rise in January, the Singapore market returned all its gains to finish 1Q23 unchanged.

– We believe the Fed impatiently raising rates when real-time inflation data continues to drop and lead indicators point to an upcoming recession.

– Disinflation is occurring although not immediately. Global growth is tapering off. We overweight any equities that looks like a bond. REITs are our tactical bet.

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