Asian shares looked set to advance on Friday after US equities snapped a two-day slide ahead of a key jobs report as traders weigh the outlook for inflation and growth.
Futures for Japan and Australia pointed higher. Markets will be closed in Hong Kong and mainland China, where officials have vowed to carry out a slew of government policies to stimulate the economy. Earlier, the S&P 500 rose 1.8%, led by gains in consumer discretionary shares, while the tech-heavy Nasdaq 100 added 2.8%. US futures contracts edged higher early in Asia trading.
The dollar fell while risk-sensitive currencies including those of Australia and New Zealand rallied. Benchmark Treasury yields were little changed just above 2.9%.
Straits Times Index (STI) administrator FTSE Russell announced on Thursday (June 6) that there will be no changes to the constituents of Singapore’s blue-chip index following the June 2022 quarterly review. The STI reserve list, comprising the 5 highest ranking non-constituents of the STI by market capitalisation, will be, in order of size: Olam International, Suntec Reit, Keppel Reit, Frasers Centrepoint Trust and Mapletree North Asia Commercial Trust. Stocks on the reserve list will replace any constituents that become ineligible as a result of corporate actions before the next review, which will take place in September 2022.FTSE Russell partners the Singapore Exchange and SPH Media Trust, which publishes The Straits Times and The Business Times, to jointly calculate the STI.
Growth in Singapore’s linchpin electronics manufacturing industry could be slowing, as cooling global demand adds to the risks from higher supply costs, the Singapore Institute of Purchasing and Materials Management (SIPMM) warned on Thursday (Jun 2). Regional manufacturing confidence held up in May, despite continued softness in China’s factory sector. The SIPMM Purchasing Managers’ Index (PMI) inched up by 0.1 point to 50.4 points, from 50.3 in the month before. The uptick came on the back of faster expansion in new orders, which made up for slower growth in output, employment, new exports and imports. In the monthly gauge of industry sentiment, readings above 50 points indicate an expansion, and those below 50, a contraction.
Microsoft on Thursday (Jun 2) cut its fourth-quarter forecast for profit and revenue, making it the latest US company to warn of a hit from a stronger greenback and sending its shares down 3 per cent. A hawkish Federal Reserve and heightened geopolitical tensions have driven a 14 per cent gain in the US dollar against a basket of currencies over the last year, forcing companies such as Coca-Cola and Procter & Gamble to temper expectations for the rest of the year. A stronger greenback typically eats into the profits of companies with sprawling international operations that convert foreign currency into dollars and has added to corporate worries over soaring inflation.
Business news publication Forbes announced on Wednesday (Jun 2) that it has pulled the plug on a merger transaction with a specially created investment company as fewer of such deals get completed. Forbes said that its shareholders had terminated the transaction with Magnus Opus Acquisition Limited. The media company gave no reason for the shift but expressed confidence in its future. “The Forbes brand is a sought-after and trusted brand with more than 100 years of equity that is synonymous with success and validation,” said Forbes chief executive Mike Federle, who pointed to double-digit revenue growth over the past year. Forbes had announced the deal in August 2021, envisioning raising about US$600 million through the union with Magnum Opus, a special-purpose acquisition company (SPAC).
New orders for U.S.-manufactured goods increased less than expected in April, but demand for products remains strong, which should help to keep factories humming. The Commerce Department said on Thursday (Jun 2) that factory orders rose 0.3 per cent in April after advancing 1.8 per cent in March. Economists polled by Reuters had forecast factory orders would rise 0.7 per cent. Manufacturing, which accounts for 12 per cent of the US economy, is being pinned by still strong demand for goods even as spending shifts back to services. A survey on Wednesday showed the Institute for Supply Management’s national factory activity index rebounded in May after 2 straight monthly declines.
US mortgage rates dipped slightly for the third straight week of declines. The average for a 30-year loan was 5.09 per cent, down slightly from 5.1 per cent last week, Freddie Mac said in a statement on Thursday (Jun 2). Buyers have gotten a slight reprieve in recent weeks from the massive run-up in mortgage rates that has dominated this year. Borrowing costs are still up nearly 2 percentage points from the end of 2021, an increase that has started to have a cooling effect on the housing market. Nearly 1 in 5 sellers cut listing prices in the 4 weeks ended May 22, the highest level since October 2019, Redfin Corp. said last week in a report.
The number of Americans filing new claims for unemployment benefits unexpectedly fell last week as demand for labour remained strong, helping to underpin the economy amid rising interest rates and tightening financial conditions. Initial claims for state unemployment benefits fell 11,000 to a seasonally adjusted 200,000 for the week ended May 28, the Labor Department said on Thursday (Jun 2). Economists polled by Reuters had forecast 210,000 applications for the latest week. Claims have been largely treading water since hitting more than a 53-year low of 166,000 in March. Demand for labour remains strong, though some signs of cooling are emerging.
Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, CNBC, PSR
Salesforce Inc. – No signs of demand slowing
Recommendation: BUY (Maintained); TP: US$253.00
Analyst: Ambrish Shah
-1Q23 results were in line with expectations. 1Q23 revenue/adjusted PATMI was at 23% of our FY23e forecasts. Total revenue grew 24% YoY to US$7.4bn, due to 18%/17% YoY increases in core Sales Cloud and Service Cloud services, that was driven by organic innovations, including revenue intelligence feature.
POEMS Podcast: Let the Money Talk
– Future contracted revenue or remaining performance obligations (RPO) grew by 20% YoY to US$42bn. Multi-cloud adoption continued to increase as the number of deals involving five or more of Salesforce’s clouds grew 21% YoY. The digital transformation related spending by enterprises is driving growth across all Clouds.
– We maintained a BUY recommendation with a DCF target price of US$253.00 (WACC 6.1%, g 4%). We nudge lower our FY23e revenue by 1% due to projected US$300mn incremental foreign exchange headwinds. Salesforce is not experiencing a material impact on its business from macroeconomic challenges as indicated by significant future contracted revenues, healthy Free Cash Flow, and strong guidance for FY23.
Money Never Sleeps – Ep 10
Money Never Sleeps – Ep 9
SGX Company Insights Ep 51 – Keppel DC REIT
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Date: 30 May 2022
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