A quiet week as traders wait for more clues regarding interest rates

Date: November 20, 2023

  • A firm Wall St helped the STI add 18 points or 0.6%$ at 3,124.67
  • US stocks rallied after a benign Oct CPI report
  • US Treasury yields fell, probability of no rate hike in Dec now 100%
  • Genting Singapore in play thanks to earnings beat, analysts raise target prices
  • Exit offer for Boustead Projects raised from S$0.95 to S$1.18 per share
  • OCBC to pay S$191m for Indonesia’s Bank Commonwealth
  • Fall in key exports eased in Oct


A firm Wall St helped keep the STI above 3,100

It was a relatively tame trading week here, even as Wall Street stocks managed to close higher for a third consecutive week. In a holiday-shortened week, the Straits Times Index added 18 points or 0.6% at 3,124.67. Average daily volume was slightly above average at S$1.07b, ranging from a low of S$676m on Friday to S$1.37b on Wednesday.

Wednesday’s increase in volume was accompanied by a 0.9% rise in the STI that came in response to a large overnight rally on Wall Street.

On Tuesday Wall St equities surged after October’s inflation reading in the form of Consumer Price Index (CPI) data came in cooler than expected.

Price growth cooled to a 3.2% annual rate, below expectations at 3.3% and September and August annual figures at 3.7% growth.

“The CPI data confirm what everyone already knew—inflation is on the decline in a meaningful way,” said Jamie Cox, managing partner for Harris Financial Group. “The question now for the Fed is whether they continue to believe that slowing the economy into recession is needed to completely conquer inflation. I certainly hope not’’.

US Treasury yields fell, probability of no rate hike in Dec now 100%

Bonds rallied and yields fell, with the 2-year Treasury yield dipping to 4.813% before closing the week at 4.89%. The 10-year yield was down to 4.44%. The 30-year yield closed the week at 4.59%.

Over in the US, the November rally has been built on a recognition that the Fed’s rate-hike cycle ended in July, the rate of inflation should fall to the Fed’s target of 2% next year, and that rate cuts to normalize policy to a neutral level will start during the first half of next year.

Those are all necessary ingredients for a soft landing, where economic growth continues amidst low inflation.

As a result, the CME FedWatch Tool now assigns a 100% probability that the Fed will not increase interest rates at its 13 Dec meeting.

Genting Singapore in play thanks to earnings beat, analysts raise target prices

Shares of Genting Singapore jumped as much as 11.8% in heavy trading on Tuesday morning, after its third-quarter results released on Friday beat analyst expectations.

The stock closed S$0.09 higher for the day at S$0.94 on volume of 131m. On Friday, the group posted a net profit of S$216.3 million for the third quarter ended September, up 59 per cent from S$135.8 million in the corresponding year-ago period. This came as revenue rose 33 per cent, with both gaming and non-gaming revenue recording gains.

In a report released on Tuesday, DBS Group Research upgraded Genting Singapore to “buy” from “hold” and raised its target price to S$1.05 from S$1.

The research team noted that Genting Singapore’s share price declined by 15-20% since its last downgrade to “hold” and it now finds the group’s risk-to-reward profile attractive, despite potential concerns over its longer-term return on capital.

Maybank also called a “buy’’ and said it is raising its estimates for the next three financial years for Genting by 12%/6%/6% because of higher VIP volume and has therefore raised its discounted cash flow target price to S$1.16 from S$1.12.

The stock ended the week at S$0.935.

Exit offer for Boustead Projects raised from S$0.95 to S$1.18 per share

Boustead Singapore raised its unconditional cash exit offer for its real estate unit Boustead Projects from S$0.95 to S$1.18 per share. This is 23.6 per cent higher than Boustead Projects’ last-traded price of S$0.955 prior to its trading suspension.

The revised exit offer price stands at 20 times Boustead Projects’ consolidated earnings per share, and 0.9 times of its net asset value per share, for its last financial year.

Boustead Singapore said its exit offer was made at the earliest practicable time after the expiry of its moratorium on Sep 27, 2023.

This was because it was necessary for both the group and Boustead Projects’ interim results and financial positions to be considered by their respective independent financial advisors.

Boustead Singapore added that its independent directors “spent considerable time and effort during the moratorium period to weigh all possible delisting and privatisation options to achieve a positive outcome for all stakeholders”.

Boustead Singapore will hold an extraordinary general meeting before the end of 2023 to seek approval from its independent minority shareholders in acquiring Boustead Projects shares belonging to Boustead Singapore’s chairman and group chief executive, Wong Fong Fui, and his children.

Wong and his children – who collectively hold a 19.99% stake as at the close of the previous offer – have abstained from decision-making on both the previous offer and Boustead Singapore’s current exit offer due to material conflicts of interest.

OCBC to pay S$191m for Indonesia’s Bank Commonwealth

OCBC bank is proposing to pay 2.2 trillion rupiah (S$191 million) to acquire Bank Commonwealth – the Indonesian subsidiary of the Commonwealth Bank of Australia (CBA).

CBA said it entered into a binding agreement to sell its 99 per cent shareholding in Bank Commonwealth to Bank OCBC NISP, an OCBC subsidiary in Indonesia.

In a separate statement, OCBC said it also intends to acquire the remaining 1 per cent of Bank Commonwealth from its other shareholders. OCBC expects to merge Bank Commonwealth into Bank OCBC NISP after the acquisition is completed.

Bank Commonwealth was established in 1997 as a CBA-Bank International Indonesia venture. It focuses on retail customers and corporate banking services for small and medium-sized enterprise segments, and has more than 1.2 million customers.

ts net asset value stood at 4.1 trillion rupiah, which works out to be around 0.7 per cent of OCBC’s total net asset value as at Sep 30, 2023. Bank Commonwealth’s net tangible asset value for the period stood at 3.5 trillion rupiah.

Glenn Thum, senior research analyst at Phillip Securities Research, was quoted by The Business Times saying the acquisition is a “significant milestone” for OCBC, given that it is the first one under its current group CEO, Helen Wong.

Earnings in brief

Boustead Singapore reported a 19% rise in net profit for its first half ended 30 Sep 2023 to S$26.9m and a 49% increase in revenue to S$367.9m driven by significantly higher contributions from its energy engineering, real estate and geospatial divisions. The results translate to an earnings per share of S$0.056, 19% higher year-on-year. An interim dividend of S$0.015 per share has been declared, same as last year.

Golden Agri Resources posted a 25% decline in net profit for the third quarter ended Sep 30, 2023, to US$68 million from US$90 million in the same period a year earlier. Revenue in Q3 2023 rose 5% to US$2.5 billion, from US$2.3 billion in Q3 2022. The company’s revenue for the nine-month period fell 15% year on year to US$7.3 billion. Net profit for the same period fell 63 per cent to US$250 million.

Fall in key exports eased in Oct

Singapore’s non-oil domestic exports (NODX) shrank 3.4% year on year in October, continuing to ease from steeper falls in the preceding months.

The October figure marked an easing from September’s 13.2% fall, and was also better than the 6% contraction that private-sector economists polled by Bloomberg were expecting. Both electronics and non-electronics exports continued to fall on a year-on-year basis, but less sharply.

The latest figures suggest that NODX could return to positive growth in the next two months, especially given the low year-ago base, said private-sector economists.

The Business Times quoted Maybank economists Chua Hak Bin and Brian Lee saying they expect NODX to recover to positive growth in November or December, flattered by a low base. However, they maintained their full-year forecast for NODX to contract by between 9-12%.

OCBC chief economist Selena Ling expects full-year NODX to decline 12.5 per cent year on year, but added: “At least the recent tea-leaves suggest that the global electronics cycle may have bottomed and is looking to stabilise in the months ahead.”

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