DAILY MORNING NOTE | 9 June 2023

Singapore shares bucked the downtrend in most Asia bourses on Thursday (Jun 8), after recovering some lost ground in the afternoon session. International investors were concerned that the United States central bank might raise interest rates at its meeting next week, after two other central banks hiked theirs on Wednesday. Across the broader market, gainers and decliners were almost evenly split at 263 to 264, with a turnover of about 1.2 billion securities worth S$899.2 million in total.

Wall Street stocks finished solidly higher on Thursday, reflecting better sentiment on the US economy and a consensus view that the Federal Reserve will not hike interest rates next week. The Dow Jones Industrial Average finished up 0.5 per cent at 33,833.61. The broad-based S&P 500 gained 0.6 per cent to 4,293.93, while the tech-rich Nasdaq Composite Index jumped 1.0 per cent to 13,238.52. Companies that saw major gains in the Dow included Boeing, Merck and UnitedHealth.

SG

Thomson Medical Group, a Singapore-based health-care company backed by tycoon Peter Lim, is in advanced talks to buy a controlling stake in Vietnam’s FV Hospital, people with knowledge of the matter said. Lim’s firm beat out the other interested candidates to remain in the bidding, the people said, asking not to be identified as the process is private. Thomson Medical is working with a financial adviser on the potential acquisition, the people added. Quadria Capital, a health care-focused private equity firm, was exploring a sale of its stake in FV Hospital, which could fetch around US$300 million to US$400 million in a deal, Bloomberg News reported in 2022. Other owners of FV Hospital, including its co-founder and chief executive officer Jean-Marcel Guillon may tag along and sell part or all of their stakes, people familiar with the matter said at the time. Discussions are ongoing and Quadria and Thomson Medical could still decide against a transaction, the people said.

CapitaLand Integrated Commercial Trust (CICT) has priced $400 million worth of seven-year green bonds. The bonds, which will be settled on June 19, will measure on June 19, 2030. The bonds will be issued at an issue price of 100% of their principal amount and will carry a coupon of 3.938% per annum (p.a.), or 87.3 basis points (bps) over the seven-year Singapore Overnight Rate Average (SORA). Interest payments will be made semi-annually in arrear on June 12 and Dec 12 of each year and first paid on Dec 12. The proceeds will finance or refinance the eligible green projects that have been undertaken by CICT and its subsidiaries in accordance with CICT’s green finance framework.

Singapore’s latest six-month Treasury bill (T-bill) has closed its auction with a cut-off yield of 3.84 per cent on Thursday (Jun 8). In comparison, the previous auction for the six-month tenor of the government-backed fixed income product offered a cut-off yield of 3.85 per cent. The latest auction received total applications of S$11.5 billion for the S$5.2 billion on offer, giving it a bid-to-cover ratio of 2.2. Non-competitive bids totalled S$1.9 billion and were fully allotted.

US

Adobe said on Thursday (Jun 8) it will offer Firefly, its artificial intelligence (AI) tool for generating images, to its large business customers, with financial indemnity for copyright challenges involving content made with the tools. The move to include compensation comes amid a rise in lawsuits around the image data used in AI services from companies such as Stability AI and Midjourney that can generate imagery from just a few words of text. Adobe earlier this year released a test version of Firefly, its own service which it says was created with legally safe image data. On Thursday, San Jose, California-based Adobe said it will start offering Firefly to its corporate customers as part of Adobe Express, a tool aimed at helping business users who do not specialise in design to create images and documents.

The US dollar fell slightly on Thursday (Jun 8) from near three-month highs, a day after a surprise rate hike from the Bank of Canada suggested the US Federal Reserve may also have more work to do to combat inflation. The euro was last up 0.3 per cent at US$1.073 against the US dollar – the most traded currency pair in global markets. That was despite data showing that the eurozone economy slipped into a mild recession in the first quarter, after gross domestic product statistics were revised. The US dollar index, which measures the currency against six major peers, was down 0.19 per cent to 103.84. Last week, the index hit 104.7, the highest since Mar 15.

Global payments processors Visa and Mastercard have fought off a new set of lawsuits over fees charged to retailers, with a London tribunal ruling on Thursday (Jun 8) that the proposed collective cases cannot proceed for now. The two firms already face a long list of lawsuits in London over so-called multilateral interchange fees, which retailers pay when consumers use a card to shop. Visa and Mastercard are each being sued by hundreds of claimants at London’s Competition Appeal Tribunal, which is currently managing the various cases together. Special purpose vehicle Commercial and Interregional Card Claims (CICC) brought another set of lawsuits against Visa and Mastercard last year, seeking damages on behalf of merchants which were allegedly overcharged.

Goldman Sachs Group is planning for a period of sluggish growth and higher inflation, the bank’s president John Waldron said on Thursday (Jun 8), calling it “a mini-stagflation scenario”. There will be a tougher environment for capital markets and financing as CEOs remain cautious, Waldron told a Bloomberg conference on Thursday. Despite the US economy showing resilience, concerns remain among investors that a recession could happen in an environment of stubborn inflation and high borrowing costs. There are uncertainties on the degree of the economic slowdown, with many fearing that the impact of higher interest rates has yet to be fully felt in areas such as private credit, or real estate. The firm is expected to cut just under 250 jobs in the coming weeks, a source familiar with the matter told Reuters in May. In January, it let go about 3,200 employees, its biggest head count reduction since the 2008 financial crisis.

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

RESEARCH REPORTS

Singapore Banking Monthly – Singapore interest rates stagnate

Recommendation: Overweight (Maintained)

Analyst: Glenn Thum

– May’s 3M-SORA was up 1bp MoM to 3.61%, 3M-HIBOR was up 82bps MoM to 4.41%. HIBOR is down 88bps this year.

– Singapore domestic loans dipped 5.86% YoY in April, below our estimates. Loans previously contracted at this magnitude was in 2016. The CASA balance dipped slightly to 18.8% (Mar23: 18.9%).

– Maintain OVERWEIGHT. We remain positive on banks. Bank dividend yields are attractive at 5.7% with upside surprise in dividends due to excess capital ratios and push towards higher ROEs. SGX is another major beneficiary of higher interest rates (SGX SP, BUY, TP S$11.71).

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