Daily Morning Note – 4 February 2022

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PHILLIP SUMMARY

Major U.S. stock indexes tumbled on Thursday, dragged down by technology and social-media companies, as Facebook owner Meta Platforms plunged after a disappointing earnings report.

The tech-focused Nasdaq Composite Index dropped 538.73 points, or 3.7%, to 13878.82, breaking a four-day winning streak and posting its largest one-day decline since September 2020.

The S&P 500 fell 111.94, or 2.4%, to 4477.44. It was the broad market index’s biggest daily drop in percentage terms in nearly a year. The Dow Jones Industrial Average declined 518.17, or 1.5%, to close at 35111.16.

The Bank of England on Thursday lifted its main interest rate for the second time in a row in a bid to tackle decades-high inflation. The BoE also said Britain’s annual inflation rate would peak at 7.25 per cent in April, compared with 5.4 per cent last December which was already near a 30-year high. The central bank slashed its interest rate dramatically in 2020 to help the economy weather the effects of the Covid pandemic. Policymakers were divided however on the size of the increase. A majority five members, including governor Andrew Bailey, voted for a rise to 0.5 per cent, while the remaining four wanted a larger increase to 0.75 per cent. The European Central Bank, which is also holding its regular policy meeting on Thursday, is expected to leave its key interest rates unchanged. ECB chief Christine Lagarde has downplayed inflation concerns, arguing that the forces pushing up prices across the eurozone are expected to ease over 2022.

Oil prices surged in late-day trading Thursday, sending the U.S. crude benchmark through $90 a barrel for the first time since 2014 due to ongoing supply worries and as frigid weather cascades across the United States.

BREAKING NEWS

SG

Singapore PMI dips in the new year, echoing slowdown seen across Asia. Singapore manufacturing sentiment eased slightly in the new year due to concerns over supply chain disruptions, echoing the slowdown seen across other key Asian economies. The Purchasing Managers’ Index (PMI) slipped 0.1 point to 50.6 in January, after rising slightly in the previous month, said the Singapore Institute of Purchasing and Materials Management (SIPMM) on Thursday (Feb 3). Despite the slight decline, the manufacturing sector recorded 19 straight months of expansion with January’s PMI. The electronics sector PMI also saw a slight dip of 0.2 point to 50.8 in January, expanding at a slower rate compared to the previous month.

First Ship Lease Trust turns a profit of US$88,000 in Q4, FY2021 DPU up 16.7%. This is an improvement from the net loss of US$2.2 million it reported a year ago. In Q4 2020, the trust reported an impairment on vessels of S$3.1 million. Revenue in Q4 2021 fell 27.7 per cent year on year to US$4.9 million. The manager attributed last year’s loss to the weak tanker market environment, which affected the trust’s vessels operating in pools and the spot market; there were also non-cash impairments of US$2.7 million.

Restaurant operator No Signboard has received letters of demand from the landlords of 2 of its fast-food outlets, for more than S$176,000 in arrears of rental and other monies owing. Its board is of the view that these claims will have a material adverse impact on the group’s financial position and performance, No Signboard $ No Signboard: 1G6 0% said in a bourse filing on Thursday (Feb 3) night. It added that the landlords have each threatened legal proceedings if the group fails to pay the sums. Last week, the Catalist-listed firm had said it was unable to demonstrate that it could continue as a going concern, and requested a voluntary suspension of the trading of its shares. One of the letters of demand, for the sum of S$12,161.10, came from the lawyers of Frasers Property Centrepoint, which is the landlord of The Centrepoint Singapore. No Signboard said its wholly-owned subsidiary Hawker QSR occupies a unit at the basement level of the Orchard Road shopping mall. The other letter was for the sum of S$163,965.56, from lawyers acting for Milano Central, the landlord of the premises including provisional unit #01-37 at 10 Paya Lebar Road, PLQ Mall, Paya Lebar Quarter.

Singapore approves its first oral tablet to treat Covid-19 infection. The Health Sciences Authority (HSA), in consultation with its Medicines Advisory Committee, has on Jan 31 granted interim authorisation for Pfizer’s Paxlovid. This is the first oral tablet approved in Singapore to treat mild to moderate Covid-19 in adult patients who are at high risk of progression to severe disease. It is intended to reduce the risk of hospitalisation and death, HSA said in a press statement on Thursday (Feb 3).

US

Bill targeting Apple and Google approved by U.S. Senate panel. The Senate Judiciary Committee on Thursday voted to approve a bill that would rein in app stores of companies they said exert too much market control, particularly Apple Inc and Alphabet Inc’s Google. The measure, sponsored by Democratic Senators Richard Blumenthal and Amy Klobuchar along with Republican Senator Marsha Blackburn, would bar big app stores from requiring providers to use their payment system. Blumenthal noted the 30% cut that Google and Apple take for many app and in-app purchases and subscriptions, saying it was a sign of “monopolistic power” and raises prices for consumers. The stakes are high for Apple, whose App Store anchors its $68.4 billion services business as the smartphone market has matured.

US factory orders fall in December; shipments rise further. New orders for US-made goods fell slightly more than expected in December, but manufacturing remains supported by businesses replenishing inventories. The Commerce Department said on Thursday that factory orders decreased 0.4 per cent in December. Data for November was revised higher to show orders increasing 1.8 per cent instead of 1.6 per cent as previously reported. Economists polled by Reuters had forecast factory orders slipping 0.2 per cent. Orders increased 16.9 per cent in 2021. Manufacturing, which accounts for 11.9 per cent of the economy, is being underpinned by businesses rebuilding inventories.

Amazon is raising the price of annual Prime memberships to $139. Amazon (AMZN) is raising the price of its annual Prime subscriptions from $119 to $139 per year, the company announced along with its earnings report Thursday. The price of a monthly subscription will also increase from $12.99 to $14.99. The company said it is increasing the price because of “expanded Prime membership benefits,” such as added Prime Video content and expanded free same-day shipping, as well to compensate for the rising costs of labour and transportation in its distribution network. The company last raised prices for Prime in 2018, when it bumped the annual membership up from $99. The latest price hike represents a 17% increase. The change will go into effect on February 18 for new Prime members and after March 25 for existing members.

China smartphone demand helps lift forecasts for chipmaker Qualcomm. Qualcomm posted record first-quarter revenue on Wednesday (Feb 2) and beat Wall Street forecasts for the current quarter, boosted by strong growth in the Android business and demand from China’s handset makers. The US chips firm forecast second-quarter revenue between US$10.2 billion and US$11 billion, above analysts’ estimates of US$9.6 billion, according to IBES data from Refinitiv. The company has benefited from the exit of Huawei Technologies from the smartphone market, which has led other Chinese phone brands – including Xiaomi, Honor and Oppo – to turn to Qualcomm for their chip needs.

Meta’s stock price slid $85.40, or 26%, to $237.60 after the social-media giant startled investors with a sharper-than-expected decline in profit and a gloomy outlook. Other tech and social-media stocks sold off in Meta’s wake. Spotify Technology shares sank $32.16, or 17%, to $159.76 after the streaming company declined to issue annual guidance, spooking investors. Chip maker Nvidia lost $12.94 a share, or 5.1%, to close at $239.48.

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

Alphabet Inc – Another blowout quarter

Recommendation: BUY (Upgrade); TP US$3493.00, Last close:
US$2861.80; Analyst: Jonathan Woo

– 4Q21 results in line with expectations. FY21 revenue/PATMI at 102/103% of our FY21e forecasts.

· 33% YoY growth in advertising revenue led by increasing advertiser spend and consumer online activity.

· Cloud remains GOOGL’s fastest growing segment with 45% YoY revenue growth.

· GOOGL announces plans for 20-for-1 stock split by 3Q22.

· We upgrade to a BUY recommendation with an increased DCF target price (WACC 6.6%, g 3.5%) of US$3493.00.

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