Date: August 28, 2023
- Investors waited for clues as to where US rates might be headed
- US Fed chair Powell delivered a hawkish speech at Jackson Hole
- The STI rose 15 points or 0.5% to 3,189.88
- Probability of a 25-bp US rate hike in Sep now 19.5%
- US mortgage rates at highest since 2001
- Singtel reported 23.1% fall in 1Q net profit; analysts satisfied with results
- PropertyGuru reported S$6.5m loss for Q2
- SGX RegCo flagged unusual trading in Dasin Retail Trust
- Asti’s shareholders voted out entire board at disputed EGM
A quiet week in which investors waited for clues on US interest rates
It was a relatively directionless week for the Straits Times Index (STI) as investors waited for further clues as to where US interest rates might be headed from US Federal Reserve chief Jerome Powell’s Friday speech at Jackson Hole.
The STI did manage to rebound from the selling of the previous week that saw it lose 121 points but as it turned out, the rebound was modest – a 16 points or 0.5% rise to 3,189.88 that came with low average daily volume of S$905m.
US Fed chief Jerome Powell’s Jackson Hole speech was hawkish
Federal Reserve Chair Jerome Powell took a hawkish tone in his speech at Jackson Hole, noting that while inflation has tumbled in recent months, it isn’t yet at an acceptable level. Officials at the central bank are prepared to do whatever it takes to bring the rate down to the 2% target, he said.
“We are prepared to raise rates further if appropriate and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective,” Powell said.
For the week, the Dow dropped 0.5%, marking its second straight week of declines. The S&P 500 rose 0.7%, gaining 0.8% on the week and snapping a three-week losing streak. The Nasdaq Composite closed up 0.9%, rising 2.3% on the week–and snapping its own three-week losing streak.
Probability of a 25-basis points Sep rate hike now 19.5%
After Mr Powell’s speech, the federal funds futures market began pricing in a 19.5% chance of the Fed raising interest rates at its Sep meeting, according to the CME FedWatch tool.
US mortgage rates at their highest since 2001
Strong economic data sent US mortgage rates last week to their highest level since 2001—a jump that will continue to keep many prospective home buyers out of the market.
Freddie Mac ‘s measure of the average 30-year fixed-rate mortgage climbed 0.14 percentage point to 7.23% this week. It was the highest level since the first reading in June 2001, according to historic data.
The gain was the sharpest week-over-week increase since mid-July. The gauge has climbed for five consecutive weeks.
“Indications of ongoing economic strength will likely continue to keep upward pressure on rates in the short-term,” Sam Khater, Freddie Mac’s chief economist, said in a statement.
Singtel reported 23.1% fall in 1Q net profit; analysts satisfied with results
Singtel reported a 23.1% fall in net profit to S$483m for its first quarter ended 30 June versus the same period last year. The drop was mainly due to a net exceptional loss of S$88 million, compared with a net exceptional gain of S$129 million observed in the first quarter of FY2023.
However, underlying net profit rose 14.5% to S$571m due to lower net finance expenses and a higher share of profits from associates, mainly Airtel, AIS and Intouch.
The net exceptional loss came from associate Bharti Airtel as it recorded significant foreign exchange losses from a steep devaluation of the Nigerian naira against the US dollar. Singtel’s share of this exceptional loss amounted to S$62 million.
There was also a fair value loss of S$52 million from Airtel’s foreign currency convertible bonds, bringing Singtel’s total share of Airtel’s exceptional losses to S$114 million.
Operating revenue dropped 2.7 per cent year on year to S$3.5 billion from S$3.6 billion mainly because the Australian dollar weakened 9% against the Singapore dollar.
Following the set of results, DBS Group Research, UOB Kay Hian (UOBKH), Maybank Securities and RHB Bank Singapore have all kept their “buy” calls on Singtel at unchanged target prices, whilst CGS-CIMB Research has maintained their “add” call at a lowered target price.
DBS, UOBKH, Maybank and RHB have kept their unchanged target prices of $3.18, $3.15, $3.10 and $3.40 respectively, whilst CGS-CIMB has lowered their target price to $2.80 from $3.00 previously.
Broker RHB said the results were within expectations and hoped that Singtel will achieve its low double-digit return on inversed capital soon, supported by its asset recycling initiatives and its reinvigorated core business.
It also noted there is scope for more value unlocking of infrastructure assets. “Stock valuation is supported by double-digit earnings growth, with value unlocking and dividends per share upsides’’ said RHB in its “buy’’ recommendation.
PropertyGuru reported S$6.5m loss for Q2
Online property portal PropertyGuru reported a S$6.5m net loss for its second quarter ended 30 June 2023 versus a net profit of S$3.8m for the same period last year. However, revenue was up 11.7% to S$36.9m thanks to higher contributions from its marketplaces, data services and fintech segments.
Its Singapore marketplaces saw the highest increase in revenue, up 24.5% to S$21.5 million from S$17.3 million last year.
The only segment which registered a fall in revenue was its Vietnam marketplaces where revenue for Q2 fell 26.9% to S$5.1 million, from S$6.9 million a year earlier.
The company said it continues to project full-year 2023 revenues to be between S$160-170 million, with adjusted earnings before interest, taxes, depreciation and amortization to be between S$11-$15 million.
It, however, cautioned that revenues would now be at the “bottom end of the range” due to the “ongoing situation” in Vietnam.
SGX RegCo flagged unusual trading in Dasin Retail Trust
Frontline market regulator SGX RegCo on Monday issued a “Trade with Caution’’ alert on Dasin Retail Trust, on the grounds that an individual seemed to be buying units of the China retail property trust to maintain the price.
SGX RegCo said Dasin’s closing price stayed in the S$0.089-0.094 range between 17 July to 17 Aug, which was the period the person was buying the units. The individual was not named but SGX RegCo said initial findings suggest he or she is connected to Dasin.
It also said the individual’s purchasing activity was “particularly unusual and aggressive’’ following negative announcements by Dasin on 11 Aug and 14 Aug regarding notices of demand which Dasin received.
The regulator said the matter has been referred to the relevant authorities. Dasin’s price ended the week at S$0.086.
Asti’s shareholders voted out entire board at disputed EGM
Shareholders of Asti on Tuesday passed resolutions at an extraordinary general meeting (EGM) to replace the entire board with five new directors.
Around 95.5 per cent of the 220 million shares represented at the shareholder-requisitioned EGM were in favour of the resolutions, the semiconductor manufacturing services provider said in a statement.
The EGM was requisitioned by four shareholders of the watch-listed semiconductor company.
However in a bourse filing on Wednesday, Asti said lawyer letters have been sent to the parties’ lawyers, notifying them of the company’s position – that the EGM was invalidly called and is itself invalid, and that legal proceedings are in motion.
Through the letter, the board asserted that the parties had attempted to unlawfully take control of the company, its assets, its staff, and its group of companies.
The company had been sparring with the four shareholders over the validity of the EGM and urged other shareholders to attend its annual general meeting (AGM) on Aug 31 instead, as the AGM was the “appropriate forum” to bring up any issues or resolutions.
The Securities Investors Association (Singapore), or Sias, urged shareholders to attend both the EGM and the AGM, as both are avenues for shareholders to discuss issues affecting them, adding that the issue of the legality of the EGM is for a court to decide, and not the company.
The Singapore Exchange Regulation, or SGX RegCo, noted that all parties should work together to successfully conduct a shareholder-requisitioned meeting, and if the company feels that such a requisitioned meeting should not proceed despite engagement with the those calling for the meeting, it can seek a court ruling on the matter.
On Thursday, the requisitioning shareholders said they will seek the Court’s decision as to the validity of the EGM as well as an order to block the company’s Annual General Meeting scheduled to be held on 31 Aug.
Asti’s shares have been suspended since 5 July 2022.
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