Daily Morning Note – 3 December 2021

PHILLIP SUMMARY

Asian stocks looked set for a mixed start Friday amid easing concerns over the omicron virus strain but hurdles for Chinese technology firms. Treasury yields rose after comments from Federal Reserve officials.

Australian equities advanced and futures pointed higher for Japan. Hong Kong contracts slipped after a slide in Chinese shares traded in the U.S. over the risk of delisting for flouting disclosure rules.

Dip buyers bolstered U.S. stocks sensitive to the economic outlook, fueling the S&P 500’s best day since October in a choppy week. U.S. futures fluctuated.

Treasuries slid and the yield curve flattened after Fed officials laid out the case for a faster stimulus removal to curb inflation. The dollar was steady.

In the oil market, OPEC+ proceeded with a scheduled output hike but left room for quick adjustments if the pandemic changes the outlook. Crude rallied.


BREAKING NEWS

SG

PhillipCapital has bought over the stockbroking business of Alliance Investment Bank, and the two entities will form a strategic partnership to collaborate and offer their products and services to each other’s customers. The acquisition was made via Phillip Futures Sdn Bhd, the derivatives broking arm of PhillipCapital in Malaysia. The transaction amount wasn’t disclosed. This move follows Phillip Futures in Singapore winning its own stockbroking license, in a bid to expand its offerings to its customers and win over new ones. This license is separate from the one held by Phillip Securities, the main stockbroking arm of PhillipCapital.

Property developer CityDev will acquire Central Square for S$315 million as part of plans to redevelop its Central Mall properties and the surrounding area into a mixed-use lifestyle hub. Located at 20 Havelock Road, Central Square is a 99-year leasehold commercial and residential development in the Singapore River precinct, with a remaining lease tenure of 72 years currently held by Far East HTrust. It comprises a serviced residence and commercial spaces including offices and retail units, said CDL in a statement on Thursday (Dec 2). Through its subsidiary, CDL Constellation, the group has entered into a put and call option agreement to acquire Central Square from FEHT for S$313.2 million and the reversionary leasehold interest of about 1.5 years from OPH Riverside Pte Ltd, a subsidiary of Far East Orchard: O10 +1.87% , for S$1.8 million.

Razer Inc said on Thursday (Dec 2) that a group led by its top executives proposed to take the gaming hardware maker private in a deal that values the Hong Kong-listed company at HK$24.7 billion (S$4.3 billion). The group led by chairman Min-Liang Tan and non-executive director Kaling Lim, who own around 57 per cent of Razer, are offering HK$2.82 a share for the remainder of the company and the offer is final, Razer said. The consortium includes private equity firm CVC Capital Partners, it said. Razer shares slid nearly 8 per cent after the announcement to HK$2.46, underperforming the broader Hong Kong market that gained around half a percent.

Unitholders of Keppel DC Reit have voted in favour of the proposal to invest a total of S$89.7 million in bonds and preference shares to be issued by M1 Network (NetCo), which owns the mobile, fixed and fibre assets of telco M1. During the Keppel DC Reit’s extraordinary general meeting (EGM) on Thursday (Dec 2), some 95.2 per cent of unitholder votes signalled their approval of the first resolution for the NetCo bonds and preference shares investment as an interested-party transaction. M1 is jointly owned by Keppel Corp and Singapore Press Holdings, which publishes The Business Times. In addition, 96.4 per cent of unitholder votes were in favour of the proposed fee supplement for a one-off acquisition fee payable to the real estate investment trust (Reit) manager in connection with the investment, which is non-real estate related.


US

Applications for US state unemployment benefits rose by less than forecast last week after a plunge tied to seasonal adjustments in the prior period. Initial unemployment claims in regular state programmes totalled 222,000 in the week ended Nov 27, an increase of 28,000 from the prior week, Labor Department data showed on Thursday (Dec 2). The median estimate in a Bloomberg survey of economists called for 240,000 applications. The smaller-than-expected rise in claims suggests additional progress in the job market. At the same time, seasonal adjustment difficulties are likely to persist into the new year, making the figures tricky to interpret.

Worries over surging inflation and a new variant of the coronavirus are roiling the US corporate junk bond market, though some believe the tumble could draw investors seeking higher yields. November marked the worst month since the start of the pandemic for the bonds of low-rated companies, with high-yield bonds notching an average return of -1.03 per cent, the lowest since March 2020, showed Morningstar Direct data. Spreads, which indicate the yield premium investors demand to hold junk-rated debt over safer US Treasuries, also widened the most since the beginning of the Covid-19 pandemic. Among the factors driving the moves were fears that higher inflation will force the Federal Reserve to normalise monetary policy faster than expected, as well as a rush away from comparatively risky assets on worries over the Omicron variant, analysts said.

US market regulators on Thursday announced the adoption of a rule allowing them to delist foreign companies from Wall Street exchanges if they fail to provide information to auditors, which is aimed primarily at Chinese firms. The mandate requires companies to disclose whether they are “owned or controlled” by a government, the Securities and Exchange Commission (SEC) said. Congress last year passed a law specifically targeting Chinese companies under which the Public Company Accounting Oversight Board (PCAOB) must be able to inspect audits of foreign firms listed on US markets. The law also requires companies to name any Chinese Communist Party members on their board of directors.

Oil prices settled more than 1 per cent higher on Thursday, after a see-saw session that saw benchmarks swing in a US$5 range after Opec+ surprised markets by sticking to its plans to boost output slowly. Brent crude futures settled up 80 cents, or 1.2 per cent, at US$69.67 a barrel after touching a low of US$65.72 on the day, while US West Texas Intermediate (WTI) crude futures rose 93 cents, or 1.4 per cent, to US$66.50, after dipping as low as US$62.43. The market sold off dramatically after the Organization of the Petroleum Exporting Countries and its allies known as Opec+ issued a bit of a surprise by sticking to plans to boost output monthly by 400,000 barrels per day.


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

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