Daily Morning Note – 4 October 2021
PHILLIP SUMMARY
Asian stocks looked set for a solid start to the week after their U.S. peers climbed Friday as prospects for a pickup in growth outweighed concern over inflation pressures.
Futures pointed to gains in Japan and Australia, and U.S. contracts advanced. Mainland Chinese markets are closed through Thursday for the Golden Week holidays. The S&P 500 rose over 1% Friday after promising results for a Covid-19 pill and positive manufacturing data triggered a rally in companies that stand to benefit from an economic reopening. The dollar extended Friday’s decline against major peers. The yen ticked higher after a record number of flybys by Chinese warplanes close to Taiwan raised tensions in the region. Treasuries climbed Friday, taking 10-year yields down to 1.46%.
BREAKING NEWS
SG
In what marks the biggest deal ever by Singapore Technologies Engineering (ST Engineering), the engineering and aerospace giant has agreed to fork out US$2.68 billion in cash to buy two US-based firms that provide technical solutions and engineering services to the transportation industry. The mainboard-listed firm’s acquisition of the entire interests in TransCore Partners and TLP Holdings will accelerate the growth of its smart city business and position it as a market leader in smart mobility, ST Engineering’s group chief executive Vincent Chong told analysts and the media at a briefing on Sunday. An extraordinary general meeting will be held for shareholders to vote on the transaction, which is expected to close by end-March 2022, said the firm in a statement.
Singtel looks set to take advantage of the growing demand for data centre capacity in South-east Asia as it leverages its local experience in the field to grow its data-centre platform abroad. On Friday, the telco announced a conditional agreement to sell a 70 per cent stake in Australia Tower Network (ATN), which operates telecommunications towers for Singtel’s Australian telco subsidiary Optus, for A$1.9 billion (S$1.46 billion) in cash. The transaction gives ATN, which owns 2,312 mobile network towers and rooftop sites, an enterprise value of A$2.3 billion, Singtel said. The buyer, AS Infra Tower, is a unit of a superannuation fund in Australia.
UOL Group‘s wholly-owned subsidiary, UOL Treasury Services, has secured a S$540 million sustainability-linked loan that is pegged to the Singapore Overnight Rate Average (Sora). The five-year loan will be used for general corporate purposes and to refinance existing loan facilities, the property group said in a statement on Friday. The loan is being financed by UOB, DBS and OCBC, with each bank extending S$180 million. If its sustainability targets are met in reducing carbon emissions and energy and water intensities for its commercial properties, UOL will be eligible for an interest rate reduction.
Pharmaceutical company iX Biopharma, through its wholly-owned subsidiary, has struck an agreement with China Resources Pharmaceutical Commercial Group Co (CRPCG) for the licensing, supply and distribution of Wafesil, a sublingual sildenafil wafer for the treatment of male erectile dysfunction, in China. In a bourse filing on Thursday, the company said that the new licensing agreement runs for an initial term of 10 years and will “allow both parties to tap on their collective strengths and capabilities to capture the vast opportunities in the China market”. The agreement marks the first deal between CRPCG and iX Biopharma following the execution of a strategic cooperation framework agreement by both parties previously announced in April 2021. It aims to engage in all-round cooperation including licensing and joint venture activities for iX Biopharma’s sublingual pharmaceutical and nutraceutical products in China, the company said.
Asia’s manufacturing activity was lacklustre in September as signs of slowing Chinese growth and factory shutdowns caused by the coronavirus pandemic weighed on the region’s economies, surveys showed on Friday. Factory activity in September shrank in Malaysia and Vietnam, and grew in Japan at the slowest rate in seven months, as chip shortages and supply disruptions added to the woes of a region still struggling to shake off the pandemic’s hit. China’s waning economic momentum dealt a fresh blow, with the official Purchasing Manager’s Index (PMI) on Thursday showing the country’s factory activity unexpectedly shrank in September due to wider curbs on electricity use. While the private Caixin/Markit Manufacturing PMI fared better than expected after slumping in August, growing signs of weakness in the world’s second-largest economy is clouding the outlook for neighbouring Asian countries.
US
Tesla delivered 241,300 electric vehicles during the third quarter of 2021, the company reported Saturday. The quarter’s deliveries topped expectations. Analysts predicted that Tesla would deliver around 220,900 electric cars during this period, according to estimates compiled by StreetAccount as of September 30. The company produced 237,823 cars in the period ending September 30, 2021, Tesla said in its report. Of that, 228,882 were its Model 3 and Y vehicles, its more affordable mid-range offerings. The remainder produced amounted to 8,941 of its Model S and X vehicles. Last quarter, Tesla delivered 201,250 vehicles and produced 206,421 cars, even as production of its Model S and X vehicles fell below 2,500.
Google is shuttering its bank account product nearly two years after announcing ambitious plans to take on the retail finance industry. One key factor: The new head of the business, Bill Ready, decided that he’d rather develop a digital banking and payments ecosystem instead of competing with banks, according to a person with knowledge of the decision. For the past few years, bank executives and investors have shuddered whenever a tech giant disclosed plans to break into finance. With good reason: Tech giants have access to hundreds of millions of users and their data and a track record for transforming industries like media and advertising. But the reality has proven less disruptive so far. While Amazon was reportedly exploring bank accounts in 2018, the project has yet to materialize. Uber reined in its fintech ambitions last year. Facebook was forced to rebrand its crypto project amid a series of setbacks.
Online travel powerhouse Expedia Group plans to unify and expand customer loyalty program offerings across its portfolio of brands. The move will result in “the most complete travel rewards offering in the industry,” according to the Seattle-based firm, with member discounts and reward earning and redemption on flights, hotels, vacation rentals, car rentals, cruises, and activities across all Expedia Group brands. Travel brands impacted include Expedia, Hotels.com, Orbitz, Travelocity and Vrbo. The step addresses, on a corporate level, a problem that has plagued consumer loyalty efforts. Ever since American Airlines in 1981 became the first major company to roll out a loyalty program, its AAdvantage frequent flyer plan, travel suppliers and others have debuted scores of similar schemes in an effort to cultivate consumer fealty to their brands.
The semiconductor chip shortage that is hamstringing the production of products ranging from cars and computers to appliances and toothbrushes will extend into 2022 and potentially beyond that, the CEO of semiconductor company Marvell Technology said. “Right now, every single end market for semiconductors is up simultaneously; I’ve been in this industry 27 years, I’ve never seen that happen,” said Marvell CEO Matt Murphy during a CNBC Technology Executive Council event on Thursday. “If it stays business as usual, and everything’s up and to the right, this is going to be a very painful period, including in 2022 for the duration of the year.” While several chip producers have announced plans to expand factory capacity, Murphy, who noted his firm is fabless and works with contract manufacturers on its designs, said “that’s not going to kick in until 2023 and 2024 — so there’s this painful period.”
Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, CNBC, PSR
Technical analysis: Semiconductor Strength in semiconductors to continue
Analyst: Chua Wei Ren
– The supply crunch for semiconductors has driven record sales and profitability across. Charts indicate an upside that broke the 5-year high. Furthermore, the rebound from Mid-2019 shows the strongest record growth for 2 years straight.
– Global sales of semiconductors may experience slight correction to the 5 years high support level near 20% after a slight drop in the month of September. The move was also replicated on the Philadelphia Stock Exchange Semiconductor Index.
– Technical Analysis shows that majority of the semiconductor stocks are exhibiting key reversal signals at the support region. Wave analysis has reveals a majority of the counters are in potential end of their corrections. Therefore, a potential rebound is brewing.
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