Daily Morning Note – 31 August 2021

Dear valued client,

The S&P 500 and Nasdaq ended at records for the second day straight on Monday as Wall Street traders bet the US economy would continue recovering from the pandemic.

The broad-based S&P 500 finished 0.4 per cent higher at 4,528.79, while the tech-rich Nasdaq Composite Index gained 0.9 per cent to close at 15,265.89.

However, the benchmark Dow Jones Industrial Average lost 0.2 per cent to end at 35,399.84.

Preeminent on traders’ minds is the fast-spreading Delta variant of Covid-19, which has forced some businesses to reimpose mask-wearing rules.

Another worry is Hurricane Ida, which struck the major petroleum hub of southern Louisiana and could potentially hit oil markets.

But investors were encouraged by Federal Reserve Chair Jerome Powell’s indication Friday that while the central bank may pull back its monetary stimulus by the end of the year, it is not likely raise interest rates for some time.


SG News

MM2 Asia – which operates cinemas under the Cathay brand – has entered into a sale and purchase agreement with local investment firm Kingsmead Properties to sell its cinema business for S$84.8 million. The deal will require shareholders’ approval at an extraordinary meeting that will be convened, as well as approval from the regulators. mm2 Asia’s founder Melvin Ang said: “The cinema business has been a strategic part of the group’s content creation and distribution business, but it has been affected by Covid-19. With this proposed sale, it will stabilise the group’s financial situation and allow mm2 to continue to focus on the development and strengthening of core production content growing opportunities. Proceeds from the proposed deal will be used to pare down the group’s borrowings, including convertible bonds due on Dec 31, 2021. The company expects to receive net proceeds of approximately S$67.34 million (after deducting all transactions costs and expenses).

Engineering company OKP has landed a S$49.6 million contract from national water agency PUB for drainage improvement works in Sungei Selarang. The works involve the upgrading of Sungei Selarang, which includes construction of a contiguous bored pile (CBP) wall, ground improvement, reinforcement concrete, and ancillary activities. The 33-month contract starts on Sept 8 this year and is slated for completion by June 7, 2024. OKP has secured other contracts from PUB in the past and is presently working on another project with PUB. The group’s current net construction order book amounts to S$263.7 million, with projects extending to 2024, OKP said.

ESR-Reit has entered into an agreement to divest an industrial building, 45 Changi South Avenue 2, for S$11.1 million. The price tag represents a 7.8 per cent premium to the property’s fair value of S$10.3 million, said the Reit in a filing to the Singapore Exchange on Monday. The net proceeds will be used to repay outstanding borrowings, finance upcoming asset enhancements and/or fund general working capital requirements. Adrian Chui, chief executive of the Reit’s manager, said, “This divestment represents an opportunity for us to divest one of our non-core assets at a premium to book value.” Post-divestment, ESR-Reit’s portfolio will consist of 57 properties across Singapore with a total gross floor area of approximately 15.6 million sq ft. The sale is subject to approval by JTC Corporation and is expected to be completed in 1Q 2022.

US News

Apple on Monday announced it is buying classical music streaming service Primephonic and will launch an app dedicated to the genre. Apple did not disclose how much it paid for Europe-based Primephonic, which confirmed that it is becoming part of the iPhone-maker’s music service. “We felt compelled to develop a streaming service that truly gets classical right – so that’s what we did over the last three years,” the Primephonic team said in the post. “But to fully achieve the next phase of our mission, we need to bring our classical streaming expertise to millions of listeners worldwide.” Primephonic will go offline on September 7, with subscribers being offered six months of free use of Apple Music, according to the companies.

Gold prices scaled on Monday to their highest in more than three weeks after US Federal Reserve chair Jerome Powell stopped short of providing any clear guidance on the timeline for paring economic support at the Jackson Hole economic conference. Spot gold was up 0.2 per cent at US$1,819.71 per ounce, as of 12.46am GMT. Earlier in the session, bullion hit a peak since Aug 4 at US$1,820.50. US gold futures were up 0.2 per cent at US$1,823.10.

Oil rose on Monday, lifted as US Gulf Coast platforms, refineries and pipelines grappled with uncertainty on restart timelines after Hurricane Ida wreaked havoc on the region. Gains were capped as Opec+ looked set to go ahead with a planned oil output increase. Global benchmark Brent settled at US$73.41 a barrel, up 71 cents or 0.98 per cent. Brent touched a session high of US$73.69, the highest since Aug 2. US crude futures rose 47 cents, or 0.68 per cent to US$69.21 a barrel.

The US Dollar steadied near two-week lows on Monday, held back by the message from the US Federal Reserve chief that there is no hurry to dial back massive stimulus. The allure of the greenback took a knock on Friday when Fed chair Jerome Powell said tapering could begin this year, but that the central bank would remain cautious. Investors have responded by pushing down the dollar index, which measures the currency’s value against major rivals. It hit a two-week low at 92.595 before steadying around 92.69, little changed on the day. The euro was trading at US$1.1800, steady on the day but close to a three-week high touched in Asian trade at US$1.1810. Japan’s yen rose to its strongest since last Wednesday at 109.70 per US dollar.

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

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