DAILY MORNING NOTE | 8 June 2023

Singapore shares closed lower amid a mixed showing in the region bourses on Wednesday (Jun 7), as sluggish China external trade gave rise to concerns about its slower economic recovery and fuelled stimulus bets. The local banking trio was a mixed bag. DBS slid 0.9 per cent to S$30.89 and OCBC slipped 0.2 per cent to S$12.33 while UOB eked out a 0.04 per cent increase to S$28.13. Gainers beat decliners 255 to 247 in the broader market, as about 1.1 billion securities with a total value of S$948.6 million transacted.

Gains by industrial companies lifted the Dow on Wednesday, while weakness among technology shares pushed the Nasdaq decisively lower. The Dow Jones Industrial Average finished up 0.3 per cent at 33,665.02. The broad-based S&P 500 declined 0.4 per cent to 4,267.52, while the tech-rich Nasdaq Composite Index dropped 1.3 per cent to 13,104.90. After a stretch in which markets were dominated by worries of a potential debt default followed by relief at a fiscal agreement, this week’s news flow has been much slower.

SG

Singapore banks are flushed with deposits with few options to deploy them amid a tepid lending environment. The city-state’s central bank is one avenue. The issue was highlighted in May when DBS Group Holdings chief executive officer Piyush Gupta said during an analyst call that the bank had lent the Monetary Authority of Singapore (MAS) S$30 billion as it is “not finding enough opportunities to put the money to work”. The liquidity surplus underscores how Singapore has been a beneficiary as Asia’s wealthy shift their money to a perceived safe haven, even as customers in the city-state have flocked to lock in high interest rates on fixed deposits. Local lenders meanwhile have signalled a softer outlook for loan growth amid global economic uncertainty.

Singapore fixed home-loan rates have recently eased, ahead of a likely pause in the US Federal Reserve’s interest rate-hike cycle. As at Wednesday (Jun 7), DBS’ fixed-rate loans were at 3.75 per cent per annum, with lock-in periods of two to five years. In January, the bank had offered a 4.25 per cent rate. Since last Friday, OCBC’s two- and three-year fixed-rate loans have been fixed at 3.65 per cent for the lock-in period. The rate in January was 4.25 per cent for the two-year fixed-rate package, and 3.9 per cent for the three-year fixed-rate package.

The manager of Manulife US Reit announced on Wednesday (Jun 7) that its tenant, The Children’s Place, has exercised its early-termination rights for the leases expiring on May 31, 2029. It will vacate its 197,949 square feet of space in the Secaucus, New Jersey, property on May 31, 2024. The Children’s Place is Manulife US Reit’s fifth-largest tenant by gross rental income and contributes 3.3 per cent of the Reit’s overall gross rental income. The leases include a one-time early-termination option, which The Children’s Place has chosen to exercise, the manager said in a bourse filing. The Children’s Place is obligated to pay rent until May 31, 2024, and has paid a termination fee of approximately US$4 million.

US

AMAZON.COM is planning to launch an advertising-supported tier of its Prime Video streaming service, the Wall Street Journal (WSJ) reported on Wednesday (May 7), citing people familiar with the matter. Discussions around the ad tier have been going on for several weeks, according to the report, and follow the launch of similar plans by rivals Netflix and Walt Disney. The streaming industry has been facing a slowdown in new sign-ups as subscribers struggling with high inflation and interest rates dial back entertainment spending and other discretionary expenses. The WSJ report also said Amazon was holding discussions with Warner Bros Discovery and Paramount Global about adding the ad-based tiers of their streaming services through Prime Video Channels.

US regulators kicked off the week by slapping Coinbase and Binance with a host of charges, claiming that the companies have operated illegal exchanges and mishandled customer funds. This could be one of the biggest blows yet to the crypto industry, which was worth trillions before the recent downturn. On Monday (Jun 5), the SEC dropped 13 charges on Binance and its chief executive Changpeng Zhao for allegedly operating a “web of deception”. The SEC has alleged that Binance artificially inflated its trading volumes and diverted customer funds, failed to restrict US customers from its platform and misled investors about its market-surveillance controls. The next day, the SEC filed charges against Coinbase, the largest crypto trading platform in the US, claiming that the company had broken the law by not registering as a broker. The SEC said Coinbase’s failure to register with it has deprived investors of significant protections, including inspection by the SEC, record-keeping requirements, and safeguards against conflicts of interest and others.

Citigroup’s CEO Jane Fraser said the bank will continue to expand its business in China during her first visit to the country this week as the US firm’s chief, amid Beijing’s push to attract more foreign capital. Fraser held a meeting with the head of China’s new financial regulator on Monday (Jun 5), the National Financial Regulatory Administration (NFRA) said in a statement on Wednesday. Fraser and accompanying executives said they are “fully confident in China’s economic and financial growth” and Citi “will play to its strength and continue to expand its business in China”, according to the NFRA statement. The bank is in the process of applying to set up a securities brokerage in China.

The US dollar dipped on Wednesday (Jun 7) as chances faded for a rate hike next week by the Federal Reserve (Fed), while the Canadian dollar touched one-month highs as traders amped up bets for the country to raise rates, and the Turkish lira hit record lows. The US dollar index has gained almost 3 per cent in the last month, partly thanks to the expectation that the Fed, which meets next week, will leave rates higher for longer.

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

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