DAILY MORNING NOTE | 9 October 2023

Week 41 equity strategy: The US equity market staged an impressive rebound on the back of unexpectedly robust job additions of 336k in September. It was a blowout compared to expectations of 170k additions. Bond yields rose as a stronger- than-expected economy raised expectations of a rate hike. We are less upbeat. Around 45% (or 139k) of the net adds to payroll were from the non-economic sensitives such as government, healthcare and social services. This rapid growth is almost triple the pre-pandemic average of 50k per month. The only “private” sector experiencing strong job growth comes from leisure, with 96k additions. The number employed in the leisure sector is still below pre-pandemic levels. In summary, despite the strong headline growth in jobs, we are sceptical that it reflects a strengthening US economy. Our view remains no rate more hikes this year. Inflation is trending down towards the Fed’s 2% target and the bond market 35 basis points climb since the recent FOMC meeting is another form of tightening. We find bonds attractive with the recent re-pricing in yields and a peak in Fed rate hikes.

Turning to Singapore, visitor arrivals remain healthy, climbing 45% YoY to 1.13mn. It remains 23% below pre-pandemic levels. Around 1/3 of the growth came from the 9-fold rise in arrivals from China. Retail sales in August witnessed a surprising bump in growth to 3.4% YoY (Jul: +0.6%). Discretionary spending such as apparel (+6.7%) and watches (+6.7%) experienced a pick-up in growth. Both positive numbers are indicators of a resilient domestic economy despite the sluggish export sector.

Paul Chew
Head Of Research

Singapore stocks ended Friday (Oct 6) in positive territory, tracking regional indices. Singapore Airlines was the top gainer on the STI, as it climbed S$0.18 or 2.8 per cent to S$6.55. About 5.7 million of its shares traded on the bourse on Friday. At the bottom was Mapletree Logistics Trust, which shed S$0.06 or 3.7 per cent to S$1.55. Local banking stocks were all up on Friday. DBS rose S$0.52 or 1.6 per cent to S$33.79, while UOB advanced S$0.10 or 0.4 per cent to S$28.26. OCBC ended the day at S$12.85 after climbing S$0.10 or 0.8 per cent.

Wall Street stocks rebounded to join major European indexes in positive territory Friday, after an initial sag as traders digested a hotter than expected US jobs report. The latest employment figures showed that the US economy added 336,000 new jobs last month, virtually double what was expected and raising concern that interest rates would be kept higher for longer. Labor Department data also showed that the US unemployment rate stayed unchanged at 3.8 per cent, maintaining pressure on policymakers looking to cool the economy.

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The application for the second fortnightly October tranche of MAS 6-month T-bills was open last Thursday (5th Oct) for investors to apply. The Auction Date, where the cut-off yield for this tranche will be announced on 12th Oct 2023.

Latest Singapore 6-Month Treasury Bill result
Cut-Off Yield: 4.07%
% of Non-Competitive Application Allotted: 100%

Mainboard-listed Mun Siong Engineering has decided to refund a bid deposit and pay penalties aggregating NT$1.14 million (S$48,501) for two of its projects with Taiwan’s state-owned CPC, after new charges were made in relation to bribes paid by its former consultant. Mun Siong will recognise the refund of the NT$1.08 million bid deposit for its CPC Taoyuan Project and penalties aggregating NT$64,000 as an expense in the third quarter ending Sep 30, 2023, it announced in a Friday (Oct 6) bourse filing. The penalty amount of NT$24,000 for its CPC Talin Project 2019 will be deducted from the existing CPC projects. Meanwhile, Mun Siong will be remitting cash to CPC Taoyuan for the penalty amount of NT$40,000 and the NT$1.08 million bid deposit refund, “as no deduction can be made without any existing project with CPC Taoyuan”.

Top Glove posted a net loss of RM463.1 million (S$134.2 million) for the fourth quarter ended Aug 31, widening from its RM63 million net loss the previous year. The glove manufacturer was hit by lower revenue and a RM388.5 million impairment over the quarter. This translated to a loss per share of 5.78 sen, compared with the previous year’s loss of 0.79 sen per share. The impairment, which had no impact on the group’s cash flow, comprised a goodwill impairment of RM138 million as well as an impairment and write-off of property, plant and equipment amounting to RM251 million. It resulted from an operational rationalisation exercise and a review of the group’s income-generating assets to strengthen its cost competitiveness, said Top Glove on Friday (Oct 6). Revenue for the fourth quarter was 52 per cent lower year on year at RM476 million, from RM990 million in Q4 FY2022.


The violence in Israel will likely prompt a move into safe haven assets as investors closely watch events in the Middle East to gauge geopolitical risk to markets. Gunmen from the Palestinian group Hamas entered Israel in an unprecedented attack on Saturday (Oct 7). Western countries, led by the United States, denounced the attack and pledged support for Israel. Rising geopolitical risk could see buying in assets such as gold and the US dollar, and potentially boost demand for US Treasuries.

US carmaker Tesla sold 74,073 China-made electric vehicles (EVs) in September, a 10.9 per cent decrease from a year earlier, data from the China Passenger Car Association (CPCA) showed on Sunday (Oct 8). Sales of China-made Model 3 and Model Y cars were down 12 per cent from a month earlier. Tesla, along with its China challengers, is bracing for a revival in consumer sentiment, buoyed by deeper discounts and tax breaks for green vehicles amid signs of the economy stabilising. The company missed market estimates for third-quarter global deliveries on Oct 2 as planned upgrades at its factories to roll out a newer version of the Model 3 mass-market sedan forced production halts. Tesla, which ships more China-made cars for exports at the beginning of each quarter while focusing on domestic deliveries at the end, almost doubled its China EV share from July to August.

Friday’s (Oct 6) sizzling Jobs Report is bolstering the probability of another Federal Reserve rate increase this year, adding to pain in credit markets that are already getting hurt by a year-long jump in yields. The strength of the US labour market increases the likelihood that the central bank won’t pivot to cutting rates next year. That’s a big negative for corporate America, which has continued boosting its debt levels even as yields have surged over the last year. Two data points that highlight the extent of corporate trouble: companies have about US$425 billion of US dollar-denominated junk debt due to mature before the end of 2025, and market yields for speculative-grade bonds are now at least 3 percentage points higher than the average coupon the borrowers are paying on their existing debt.

The greenback eased against a basket of currencies on Friday (Oct 6) as investors assessed a jobs report that showed US hiring rose broadly in September, but also that wage growth was slowing. The US dollar index, which measures the currency’s strength against a basket of six rivals, was down 0.31 per cent to 106.03. The greenback’s recent strength has been underpinned by a rapid sell-off in US government bonds, which sent yields to multi-year highs. While benchmark 10-year notes reached 4.887 per cent and 30-year yields hit 5.053 per cent – both the highest since 2007 – two-year notes rose as high as 5.151 per cent, holding below the 5.202 per cent level hit on Sep 21.

Amazon launched two satellites on Friday as part of its plan to deliver the internet from space and compete with Elon Musk’s Starlink service. The Atlas V rocket carrying the satellites lifted off from Cape Canaveral in Florida at 2.06 pm local time (6.06 pm GMT). The launch was carried out by the United Launch Alliance (ULA) industrial group, a joint venture between Boeing and Lockheed Martin. Once up and running, the company founded by Jeff Bezos says its Project Kuiper will provide “fast, affordable broadband to unserved and underserved communities around the world,” with a constellation of more than 3,200 satellites in low Earth orbit (LEO).

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


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