DAILY MORNING NOTE | 4 May 2023

Singapore stocks fell 0.6 per cent on Wednesday (May 3), led by Genting Singapore with the counter falling 3.6 per cent to close at S$1.08. The local banks were also among the losers, with UOB falling 0.7 per cent, OCBC slipping 0.2 per cent and DBS slid 2.3 per cent. Meanwhile Sembcorp Industries shares surged 5.5 per cent to close at S$4.57, ending the day as the top performer.

Wall Street stocks declined after the Federal Reserve’s latest interest rate hike on Wednesday (May 3). All three major indices retreated with the Dow Jones Industrial Average finishing down 0.8 per cent at 33,414.24, the broad-based S&P 500 shed 0.7 per cent to 4,090.75, while the tech-rich Nasdaq Composite Index lost 0.5 per cent at 12,025.33.

SG

Manufacturing activity in Singapore eased for a second straight month in April, caused in large part by the lengthy downturn that continues to hit the electronics sector amid a global slowdown. The Singapore Purchasing Managers’ Index (PMI), a key gauge of the manufacturing sector’s health, fell 0.2 point to 49.7 and followed a 0.1 point decline in March, said the Singapore Institute of Purchasing and Materials Management (SIPMM) on Wednesday. The electronics PMI dropped 0.2 point to 49.2, continuing its nine-month run in contraction mode. April’s decline comes after the sector’s PMI rose in the first three months of 2023 above the 2½-year low of 48.9 last December, but remained below the 50 level.

Lian Beng Group’s controlling Ong family, through its investment holding company OSC Capital, has made a final offer consideration to take the company private at S$0.68 per share. OSC Capital does not intend to revise its final offer, it said on Wednesday (May 3). The holding company is 51 per cent owned by Ong Pang Aik, who is also the chairperson of Lian Beng. This came after OSC Capital made a privatisation offer of S$0.62 per share in April, which was less than half the group’s net asset value of S$1.54 per share as at the end of November last year.

Consumer electronics giant Dyson Ltd. will open a new plant in Singapore to manufacture next-generation batteries for new products as it ramps up software, artificial intelligence and product development globally. The new facility, spanning the size of 53 basketball courts, is expected to be fully operational by 2025. It is part of Dyson’s ongoing £2.75 billion ($3.4 billion) five-year investment plan, the Singapore-headquartered company said in a statement Wednesday.

US

The Federal Reserve raised its benchmark overnight interest rate by a quarter of a percentage point to the 5.00-5.25 per cent range, as expected by financial markets, but in doing so dropped from its policy statement language saying that it “anticipates” further rate increases would be needed. The change doesn’t foreclose the central bank’s policy-setting committee from hiking rates again when it meets in June, but Fed chair Jerome Powell said it was now an open question whether further increases will be warranted in an economy still facing high inflation, but also showing signs of a slowdown and with risks of a tough credit crackdown by banks on the horizon. “We’re closer, or maybe even there,” Powell said of the end-point of rate increases that have boosted the Fed’s policy rate by a full 5 percentage points in the 10 meetings since March 2022.

Qualcomm reported second-quarter earnings on Wednesday that were in line with analyst expectations, but sales from handset chips, a core business for the company, declined 17% from a year earlier. EPS of US$2.15 per share adjusted matched consensus while revenue of US$9.28 billion beat US$9.1 billion expected. The company said it expected around US$8.5 billion in sales in the current quarter, short of Wall Street expectations of US$9.14 billion. Analysts were expecting current-quarter earnings guidance of US$2.16 per share, but the company said it would be around US$1.80. CEO Cristiano Amon in a statement blamed the results on a challenging environment, and the company said it had not seen evidence that smartphone sales are recovering in China. The smartphone market is looking at a tough 2023, with shipments for the global market declining over 14% in the first quarter, according to IDC.

CVS Health on Wednesday reported first-quarter results that beat earnings and revenue expectations, but the company lowered its full-year profit guidance due to costs related to recent acquisitions. Earnings per share came in at US$2.20 adjusted vs. US$2.09 expected while revenue was US$85.28 billion vs. US$80.81 billion expected. The company lowered its 2023 adjusted earnings guidance to a range of US$8.50 to US$8.70 per share, which is 20 cents lower than its previous projection of US$8.70 to US$8.90 per share due to costs associated with its US$8 billion acquisition of Signify Health and its US$10.6 billion purchase of Oak Street Health, among other items.

Barrick Gold Corporation announced that its first-quarter 2023 revenue fell to US$2.64 billion from US$2.85 billion a year earlier, while its adjusted earnings per share for the period of US$0.14 was down from the US$0.26 it recorded in the same quarter of 2022. Analysts on average had expected an adjusted profit of US$0.11 per share on US$2.5 billion in revenue. Barrick, one of the world’s biggest gold miners, cited a decrease in production and a 16% increase in the cost of sales, which was offset by a higher realized gold price, as reasons for its lower financial figures.

US drugmaker Eli Lilly on Wednesday (May 3) announced its experimental Alzheimer’s drug significantly slowed cognitive and functional decline, results hailed as “remarkable” by experts. In a placebo controlled trial of nearly 1,200 people with early forms of the disease, donanemab slowed the progression of symptoms by 35 per cent over a period of 18 months, as measured by their ability to carry out daily tasks like managing finances, driving, engaging in hobbies and conversing about current events. Lilly said it would rapidly submit its results to the US Food and Drug Administration as well as other global regulators.

Taiwan Semiconductor Manufacturing Co (TSMC) is in talks with partners to spend as much as 10 billion euros (S$14.7 billion) to build a chip fabrication plant in Saxony, Germany, according to people familiar with the matter. The planned venture between TSMC, NXP Semiconductors, Robert Bosch and Infineon Technologies will include state subsidies and would have a budget of at least 7 billion euros, with the total investment likely closer to 10 billion euros, the people said, asking not to be identified because the information is private. A final decision has not been made and the plans could still change, they said.

Ford Motor is hitting the brakes in China, the world’s largest auto market, with new plans to scale back investment in order to improve profitability. Ford has struggled to gain traction in China, where it had market share last year of 2.1 per cent and losses of US$572 million before interest and taxes. The new plan includes increasing focus on commercial vehicles, a business that is profitable in China for Ford, according to CEO Farley. The automaker also plans to use its Chinese factories as an “export hub for affordable EVs” and gasoline-fuelled commercial vehicles.

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

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