A quiet week of mixed economic data; STI dropped 0.8% to 3,207.75

Date: September 11, 2023

  • The STI lost 26 points or 0.8% at 3,207.75
  • US economic data was mixed, tech stocks came under pressure
  • Apple lost US$200b in market value on Wed & Thur on China concerns
  • Latest US jobless claims suggest labour market is still tight, rates might stay elevated for longer
  • Next week’s US consumer price index and consumer sentiment data could provide important clues
  • Currently, there is 93% chance of US Fed staying its hand at 20 Sep meeting
  • Private sector economists expect Singapore’s 2023 growth to be 1%
  • Singapore not likely to face a recession this year: PM Lee
  • Quarz announced committee for internalisation of Sabana’s manager, invites unitholders to join


In low volume, the STI drifted to a 26-pts or 0.8% loss for the week

It was a relatively quiet five days for the local stock market last week, with the Straits Times Index trading in a narrow band. Volume was low, exceeding the S$1b mark only on Monday when S$1.23b was done and touching a low point on Tuesday when only S$656.2m was traded, the lowest since S$607.2m was transacted on 4 July.

With not much in the way of inspiration coming from Wall Street, the STI finished a nondescript week at 3,207.75, a net loss of 26 points or 0.8%. Average daily turnover was S$837m.

Among the top blue chips, DBS fell S$0.07 or 0.2% to S$33.23, UOB was down S$0.16 or 0.6% at S$28.28, OCBC fell S$0.12 or almost 1% to S$12.43, SIA lost S$0.13 or 1.9% at S$6.74 and Sembcorp shed S$0.23 or 4.3% at S$5.12.

Tech stocks on Nasdaq came under pressure; China’s slowing and iPhone ban among the concerns

Over in the US, tech stocks came under pressure with Nasdaq notching up four consecutive days of losses between Monday and Thursday. Various reasons were given for this, including further signs of an economic slowdown in China, new restrictions on iPhone usage on China government officials which battered Apple’s shares and could mean the country could impose restrictions on other tech companies, as well as the prospect of the US Federal Reserve keeping interest rates high for longer.

Apple lost US$200b in market value

Over on Wall Street, Apple’s shares dropped 6% on Wednesday and Thursday or around US$200b in market value following the news of the  iPhone ban which comes ahead of the launch of its new iPhone this week.

Before China’s move, analysts had predicted that the launch of the iPhone 15 would put Apple within reach of becoming the world’s biggest smartphone maker by volume, unseating Samsung.

The UK’s Financial Times quoted Ben Wood, analyst at CCS Insight saying “A decade ago it seemed inconceivable that Apple could wrest the top spot from Samsung but it could be that we are on the cusp of that milestone. It will tantalisingly close but the China market will play a pivotal role’’.

The ban isn’t a reason to panic but it could limit the potential performance of Apple shares for the rest of the year according to analysts at JP Morgan. They lowered their target rating on Apple to US$230 from US$235, although they kept an Overweight rating.

“The [Chinese government] restrictions are coinciding with the recent launch of Huawei Mate 60 Pro (e.g., Huawei’s 5G smartphone), and the restrictions will make it tougher for Apple to continue to deliver share gains in the local market,” the JP Morgan analysts wrote.

Apple’s shares edged up S$0.62 to US$178.18 on Friday.

US interest rate fears remain after latest jobless claims data

The possibility of future rate hikes by the Federal Reserve was another concern. Investors fear there will be a continuation of aggressive monetary policy amid recent strong economic data, the most recent of which was a decline in jobless claims that indicates a labour market that is still tight.

The number of Americans seeking jobless benefits for the first time fell unexpectedly last week to the lowest level since February. Initial claims for state unemployment benefits fell 13,000 to 216,000 in the week ended Sept. 2 from a revised 229,000 in the prior week, the Labor Department said on Thursday. That was the lowest since the same level was touched in the week ended Feb. 11 and it marked the fourth straight weekly decline.

“Yes, the economy has slowed, and inflation has cooled, but employment continues to be a thorn in the side of the Fed, which has made softening the jobs market the cornerstone of its inflation battle,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley.

“The Fed may be poised to leave interest rates unchanged later this month, but they’re nowhere close to backing away from a higher-for-longer stance.”

What’s in store for the week ahead

Investors concerned over the direction of US interest rates have much more economic data to look forward to next week, including new readings for the US consumer price index and consumer sentiment.

“The August inflation report will tell a mixed story as surging energy prices weigh on headline inflation. Core readings however are expected to remain steady and that should support a September skip by the Fed,” Edward Moya, Senior Market Analyst at Oanda, wrote Friday.

“The risks for a November rate hike remain on the table and that will only happen if U.S. growth exceptionalism remains in place,” Moya added.

As at the end of Friday’s trading, the CME FedWatch Tool showed that the futures market was pricing in a 93% chance that the Fed will not raise rates at its 20 Sep meeting.

Private sector economists expect Singapore’s 2023 growth to be 1%

The median forecast among private sector economists for Singapore’s full-year growth is now 1%, down from 1.6% previously.

The outlook worsened particularly for manufacturing and non-oil domestic exports (NODX). Alongside the weaker growth outlook, all respondents expect monetary policy to stay unchanged in October’s decision.

This was disclosed in the latest quarterly survey of professional forecasters conducted by the Monetary Authority of Singapore. The survey was sent to 25 forecasters with 22 responses.

Manufacturing is expected to decline 4.4%, worse than the previously-predicted 1.3% fall. NODX is expected to contract 10.5%, compared to 5.5% previously.

Singapore not likely to face a recession this year: PM Lee

At an interview with local media following the conclusion of the 43rd Asean Summit in Jakarta, Prime Minister Lee Hsien Loon was asked about the media private sector forecast for 1% growth this year.

“For us, 1% is slow. But it’s not a recession. We will have to see how things go in Europe, America and China. I think all in, there’s some sluggishness in the economy but we don’t think that we are going into a recession this year. But what happens next year, we’re not sure yet’’.

He also noted that the world economy is currently “not that vibrant’’ so projections that the Asean economy as a whole would grow between 4-5% in 2023 are “not bad’’.

Quarz announced committee for internalisation of Sabana’s manager, invites unitholders to join

Unitholders of Sabana Real Estate Investment Trust have set up the Sabana Growth Internalisation Committee, following approval of the manager’s removal at an Aug 7 extraordinary general meeting requisitioned by activist investor Quarz.

On Friday Quarz said the committee will support and work together with the Reit’s trustee to ensure that the internalisation process is successfully completed on time, and within the target budget of S$3 million to S$5 million.

The activist investor has said that the preparatory work to submit the internalisation application to the Monetary Authority of Singapore (MAS), such as company incorporation and human resources, should not take longer than three to four months – or by December 2023.

It emphasised that the trustee should set a “clear target” to complete the internalisation process by Sabana’s annual general meeting in April 2024.

Investing with Insight: Watch this Week’s Technical Outlook