Daily Morning Note – 7 October 2021

PHILLIP SUMMARY

Asian stocks look set to climb early Thursday after progress on the U.S. debt-ceiling impasse lifted equities on Wall Street. The dollar remained higher and Treasuries were steady as traders await key American jobs data.

Australian shares advanced, while futures rose for Japan and Hong Kong as well as the U.S. The S&P 500 and Nasdaq 100 erased losses of more than 1% to close with gains on a possible deal to boost the debt ceiling into December. That would alleviate the immediate risk of a default but leave the political fight simmering in Washington.

The yield on the U.S. 10-year Treasury note was little changed. Investors are continuing to weigh the economic recovery against inflation risks from a jump in energy costs. ADP employment data beat expectations and a robust U.S. nonfarm payrolls report Friday could cement predictions of a reduction in Federal Reserve stimulus starting next month.


BREAKING NEWS

SG

Mainboard-listed RH Petrogas announced on Wednesday that it has entered into a conditional capitalisation deed for the company to allot and issue 90 million new shares at S$0.172 apiece to a company, Surreyville. In a bourse filing, it said this would be in full repayment and discharge of the sum of S$15.48 million, being a significant portion of the interest-free shareholder loans owed by the company to Surreyville. RH Petrogas’ controlling shareholders are Tiong Hiew King and Tiong Ik King, who together with their family members, hold an aggregate of 63.9 per cent shareholding interest in the company. Surreyville is an entity within the Tiong family group that holds around 28.6 per cent direct shareholding interest in RH Petrogas.

Moody’s Investors Service has affirmed the Aaa issuer rating of Singapore Technologies Engineering (ST Engineering), but the outlook for the ratings has been cut to negative from stable, it said on Wednesday. At the same time, Moody’s has downgraded ST Engineering’s Baseline Credit Assessment (BCA) to baa1 from a3. BCAs are opinions of issuers’ standalone intrinsic strength, absent any extraordinary support from an affiliate or a government. Moody’s vice-president and senior analyst Nidhi Dhruv said the BCA downgrade was “to reflect our expectation of a deterioration in its financial profile and liquidity following its announcement of a debt-funded acquisition of TransCore for US$2.68 billion on a cash-free and debt-free basis”.

Olam International’s wholly-owned unit Olam Treasury has secured a medium-term samurai loan facility of 26.7 billion yen (S$324.7 million) in the Japanese market, the mainboard-listed group announced on Wednesday. Samurai loans are yen-denominated, cross-border syndicated loans issued in Japan to overseas borrowers. Guaranteed by Olam, the facility comprises a three-year tranche of 20.7 billion yen, as well as a five-year tranche of six billion yen. Proceeds will be used to refinance Olam Treasury’s existing loans and for general corporate purposes, said the group.

SIA Engineering Company (SIAEC) on Wednesday said it has divested its entire 39.2 per cent stake in joint venture (JV) Asian Surface Technologies (AST) for US$2.79 million in cash to its JV partner PAS Technologies. The mainboard-listed provider of maintenance, repair and overhaul (MRO) services said in a bourse filing that it will recognise an estimated gain of S$2.68 million on the divestment. AST is a JV between SIAEC, United Technologies International Corporation and PAS, which each hold a 20 per cent and 40.8 per cent stake respectively. The JV’s principal activities include repairing aircraft engine fan blades and providing wear-resistant and high-temperature corrosion-resistant coating services to the aviation, oil and gas industries.

United Hampshire US Real Estate Investment Trust (UHReit) has priced its private placement at the middle of its issue price range at US$0.63 per new unit, it said in a bourse filing on Wednesday. It will issue about 55.6 million new units to raise gross proceeds of US$35 million. The manager said it had exercised the placement upsize in full “in view of the strong demand”. The issue price represents a discount of 6 per cent to the volume weighted average price (VWAP) of 66.99 US cents per unit and a discount of 3.4 per cent to the adjusted VWAP of 65.24 US cents per unit, for trades done on the preceding market day on Oct 4 up to the time the placement agreement was entered.


US

A sharp jump in mortgage interest rates over the past few weeks is taking its toll on mortgage demand. Total application volume fell nearly 7% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.14% from 3.10%, with points rising to 0.35 from 0.34 (including the origination fee) for loans with a 20% down payment. That is the highest level since July. Refinance demand, which is especially sensitive to weekly interest rate movements, fell to the lowest level in three months, down 10% last week compared with the previous week. Volume was 16% lower than the same week one year ago.

Home Depot is hiring Walmart to deliver paint, tools and other online purchases to customers’ doors. The two retailers announced the partnership Wednesday. The companies declined to share terms of the deal or the length of the contract. The home improvement retailer is the first retail client to sign up for Walmart’s new delivery business, GoLocal. Walmart launched the business in late August, with plans to pick up customers ranging from local stores to national players and make money from last-mile deliveries, similar to a third-party service like Instacart. Deliveries are made by gig economy workers who use Walmart’s delivery platform, Spark Driver.

On Wednesday, Google launched a suite of changes to many of its core products to help consumers make sustainable choices more easily. “Today, climate change is more than a threat,” Sundar Pichai, the CEO of Google and parent company Alphabet, said in a prerecorded video during a virtual press event Tuesday. “It is a real and present danger. From wildfires to flooding to more frequent and severe storms, climate change is the most profound risk we face, one that affects our health, our economies and our future together on this planet.” Google has been a corporate leader in sustainability. It became carbon-neutral in 2007, meaning that it has purchased offsets to balance all carbon-emitting energy sources since then, and has pledged to run on carbon-free energy by 2030.

Facebook is having a rough week — and it’s not even halfway over yet. On Tuesday, the social media giant faced negative testimony about user health and safety from a whistleblower in front of Congress. That came immediately after a massive outage took Facebook, Instagram and WhatsApp offline for more than six hours on Monday. That downtime likely cost Facebook a pretty penny in lost advertising revenue: The company took home $84.2 billion from ads in 2020 alone. Fortune estimated that Facebook lost nearly $100 million on Monday, based on the company’s quarterly revenue. Ad measurement firm Standard Media Index’s analysis was more conservative: a roughly $3.3 million loss, based on how much money advertisers spend on Facebook’s platforms per hour.

Wall Street is expecting a lot from General Motors’ two-day investor event that starts Wednesday afternoon – from specific revenue and earnings targets to new details about its electric and autonomous vehicle operations. But what GM investors really want is a roadmap for sustainable shareholder growth. It’s something the automaker has flirted with under CEO Mary Barra but never been able to achieve. The stock has swung wildly under Barra’s reign, from a 60% surge in share price to an almost as big drop since she took the helm in January 2014, according to FactSet. Before this year, shares of GM were largely down since Barra took the reins. They’re now up by 36%, with almost all of that growth coming this year alone.


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

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