Daily Morning Note – 5 November 2021


US stocks had another healthy day of trading on Thursday, with the S&P 500 and Nasdaq again posting records and the Dow dipping only slightly. The continued vigor in equity markets appeared to be driven by positive feeling about Federal Reserve policy, after the US central bank announced Wednesday it would begin tapering the bond purchases meant to support the economy during the pandemic. Though rising inflation is a concern, markets have generally welcomed the Fed’s easy money policies, and Adam Sarhan of 50 Park Investments said investors approve of the slow approach to dialing back its stimulus or raising interest rates.



Temasek’s mandatory general offer for Sembcorp Marine (Sembmarine) closed with 8 per cent acceptances on Wednesday (Nov 3). This – taken together with the shares owned, controlled, or agreed to be acquired by Temasek and its concert parties – amounts to an aggregate of about 17.1 billion shares, representing about 54.6 per cent of the total number of issued shares, according to a bourse filing late on Wednesday (Nov 3).

DBS on Friday (Nov 5) reported a net profit of S$1.7 billion for Q3 FY2021, rising 31 per cent from a year ago due to higher loans and fee income, in a bourse filing before the market opened. The reported net profit beat analyst estimates of S$1.6 billion, based on forecasts compiled by Refinitiv. Loans for Q3 grew 2 per cent over the quarter or 2 per cent in constant-currency terms to S$405 billion.

Singapore will phase out the use of unabated coal in its electricity mix by 2050 and restrict direct government finance of unabated coal power internationally. The city state is one of 28 new members that on Thursday (Nov 4) signed up to the world’s largest alliance on phasing out coal, the Powering Past Coal Alliance. The group’s members include sub-national governments, businesses and other organisations. Singapore’s membership was announced at the UN Climate Change Conference in Glasgow, also known as COP26. It is one of the first Asian national governments to join the alliance.


Federal Reserve Chair Jerome Powell is doubling down on the US central bank’s new policy framework – saying he won’t entertain interest-rate increases until the labor market heals further, even though inflation could run hot for months. “There is still ground to cover to reach maximum employment,” Powell told reporters Wednesday. “The inflation that we’re seeing is really not due to a tight labor market.” His comments came after the Federal Open Market Committee (FOMC) announced it would start slowing its US$120 billion of monthly asset purchases at a pace that puts it on track to finish the process by mid 2022. The FOMC’s policy statement also included new language hedging the risk that inflation might not prove to be entirely transitory.

The political rebuke voters delivered to Democrats in Virginia has not given the White House second thoughts about President Joe Biden’s ambitious policy agenda but is making some Democrats in swing states nervous. Since the Republican victory in the Virginia governor’s race on Tuesday, the White House message to Democrats facing competitive elections has been simple: Pass the social spending and infrastructure bills soon, or face defeat in the more consequential battle to keep control of the House of Representatives and Senate in 2022, according to administration officials and allied Democrats.

Oil prices sank on Thursday, reversing earlier gains in a volatile session after a report that Saudi Arabia’s oil output will soon surpass 10 million barrels per day for the first time since the outset of the Covid-19 pandemic. The report, from Saudi-owned Al Arabiya TV, came after the nation, along with other Organization of the Petroleum Exporting Countries and its allies, agreed to stick to previously agreed upon production increases. Brent crude fell US$1.45, or 1.8 per cent, to settle at US$80.54 a barrel. Earlier, Brent rose to US$84.49 a barrel. US West Texas Intermediate crude fell US$2.05, or 2.5 per cent, to settle at US$78.81 a barrel, well off the session high of US$83.42.

Telecom giants AT&T and Verizon agreed to push back deployment of a new 5G frequency band to allow time to address air safety concerns, US regulators said Thursday. The two companies will “voluntarily pause” the commercial rollout “to further assess any impact on aviation safety technologies”, the Federal Aviation Administration and the Federal Communications Commission said in a joint statement. The two companies had planned to begin using the 5G network on December 5, after spending tens of billions of dollars to purchase licenses.

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

United Overseas Bank Limited – Stable recovery

Recommendation: Accumulate (Maintained; TP S$29.00, Last Close: S$27.20

Analyst: Glenn Thum

– 3Q21 earnings of S$1.05bn in line with our estimate. 9M21 PATMI is 73% of our FY21e forecast.

– NIMs eased 1bp QoQ to 1.55%, though NII grew 2% in the same period. Guidance of stable NIM for FY21e unchanged. Impairment provisions of 20bps below our forecast of 30bps in FY21e credit cost.

– Maintain ACCUMULATE with unchanged target price of S$29.00. We hold our FY21e estimates unchanged. Recovery path for UOB is on track. Potential upside surprise includes GP writebacks and special dividends.

Venture Corporation Ltd – Disrupted quarter

Recommendation: NEUTRAL (Maintained); TP S$19.20, Last close: S$18.95;
Analyst Paul Chew

– Results were below forecast. 3Q21 PATMI declined 4% YoY to S$77mn. YTD21 Revenue and PATMI were 66% and 63% respectively.

– Fulfilment of customer orders disrupted by global components shortages and the Extended Movement Control Order (or factory closures) in Malaysia.

– We are lowering our FY21e revenue and PATMI by 6% and 10% respectively. Recovery this quarter has been stalled due to production disruptions. The company mentioned that demand is healthy and broad-based demand. In addition, the workforce in Malaysia is almost fully vaccinated, which should allow manufacturing activities to resume as normal. We expect some spill-over of orders into 4Q21. We maintain our NEUTRAL recommendation. Our target price is rolled over to 16x PE FY22e, its 5-year average. Re-opening and removal of lockdown should ease pressure on the supply chain in FY22e. The share price is currently supported by dividend yields of 4.5%, 11% ROEs and S$853mn net cash.

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