Date: October 28, 2024
- A sudden rise in US bond yields rocked Wall St
- The Dow Jones Industrial Average fell all five trading days
- The STI lost 47 points or 1.3% at 3,593.41
- Futures market still almost certain Nov’s rate cut will be 25 basis points
- Tung Lok, Japan Foods issued profit warnings
- iFast’s Q3 profit up 97.3% to S$16.8m
Rising US bond yields took the wind out of Wall Street’s sails
The bond market took centre stage as yields around the globe jumped, meaning prices fell. On Monday, the yield on the 2-year US Treasury rose above 4% at 4.032% whilst the 10-year spiked up to 4.189%.
They continued to rise, touching 4.085% and 4.25% respectively on Wednesday before pulling back on Thursday and then resuming their climb on Friday to 4.105 and 4.24%.
With the Dow Jones Industrial Average dropping for five consecutive sessions, the Straits Times Index for three of the five trading days, eventually recording a net loss of 47 points or 1.3% to fall below 3,600 at 3,593.41.
Average daily volume was just above S$1b versus S$1.16b the week before.
Bond yields have been rising as the 2024 election approaches and traders worry about the potential implications of inflationary policies if either party wins both Congress and the White House.
Traders have been monitoring commentary and remarks by Federal Reserve policymakers this week reflecting on September’s jumbo 50-basis-point interest rate cut and the potential path for future monetary policy.
Their tone has broadly been more cautious, with Beth Hammack of the Cleveland Fed on Thursday cautioning, “We are not saying mission accomplished when it comes to inflation.” Others have stated the need to be “cautious and deliberate” and “patient” with further cuts.
How Wall St fared – the Dow fell all five days but Nasdaq recorded 7th week of gains
Wall Street saw a volatile week, one in which the performance of all three major averages differed significantly from each other. The S&P 500 halted its longest weekly win streak of the year, a span in which it took its number of record closes for 2024 to 47.
Meanwhile, the blue-chip Dow (DJI) slumped for the week, weighed down by disappointing quarterly results and negative updates from its constituents. Conversely, the Nasdaq Composite extended its weekly win streak to seven and took out a new record intraday high after 74 trading days.
For the week, the S&P 500 slipped 1.0%, and the Dow slid 2.7%, while the Nasdaq Composite gained 0.2%.
Futures market still thinks Nov’s rate cut will be 25-points
The futures market continued to anticipate a 25-basis points rate cut at 7 Nov Federal Open Markets Committee meeting – as of Friday and according to the CME FedWatch Tool, there is a 95% chance that the Fed will lower rates by this amount.
The remaining 5% is that there will be no change, which means the market does not expect a 50-points cut.
Tung Lok, Japan Foods issued profit warnings
Catalist’s restaurant groups Tung Lok Restaurants and Japan Foods Holding separately issued profit warnings last week, underscoring the challenges that restaurant operators are facing.
The food businesses warned that they expect to incur net losses for the half-year ended Sep 30, 2024, with both noting the challenging economic environment. They did not comment on the extent of the losses.
Tung Lok had registered a net profit in the year-ago period, as well as the preceding six-month period ended Mar 31, 2024, which closed its previous financial year.
It said the net loss in the most recent financial H1 was due to a drop in revenue as a result of the challenging economic environment, which has affected overall sales.
But it added: “Traditionally, the group’s performance in the first half of the financial year (April to September) is weaker than that of the second half of the financial year (October to March)’’.
Meanwhile, JFH attributed its latest half-year’s loss to two main factors: higher selling and distribution expenses compared with the year-ago period; and the provision for impairment loss on a loan to its joint venture company.
iFast’s Q3 profit up 97.3% to S$16.8m
Digital bank and wealth management platform iFast posted a 97.3% rise in net profit to S$16.8 million for its third quarter ended Sep 30, 2024. Earnings per share stood at S$0.0564 for the quarter, up from S$0.0288 the previous year whilst revenue for Q3 rose 49.7% to S$99.1 million.
The increase in profitability was driven by contributions from its ePension division, as well as improvements across its core wealth management platform business, which includes its banking operations.
In the quarter, investor sentiment improved further amid rate cuts in the US and the easing of inflation concerns. The rally in both equity and fixed income markets benefited its wealth management platform business, the company said.
The group’s assets under administration grew 23.6% on the year to reach a record S$23.6 billion, driven by net inflows of S$813 million in the quarter.
Selected earnings announcements
OUE Real Estate Investment Trust (OUE REIT) reported a 3.7% dip in net property income (NPI) in the third quarter to S$60.3 million due to an upward revision of prior years’ property tax for Hilton Singapore Orchard and Crowne Plaza Changi Airport. Revenue for Q3 was 1.3% lower at S$74.8 million. The commercial segment recorded revenue of S$47 million, 1.1% lower due to lower contribution from Lippo Plaza. As at Sep 30, the REIT’s committed occupancy for its Singapore office properties stood at 95.4%. It reported positive rental reversions of 10.8% for office lease renewals.
Mapletree Logistics Trust reported a 2.1% fall in NPI for its second quarter ended 30 Sep to S$158.6m and a 1.8% drop in revenue to S$183.3m mainly due to lower contribution from China, the absence of contribution from divested properties, and depreciation of various regional currencies against the Singapore dollar. MLT’s distributable income for Q2 fell to S$102.3 million, 9.1% lower than the S$112.5 million recorded the year before. A distribution per unit (DPU) of S$0.02027, which is 10.6% lower than last year’s DPU will be paid on 17 Dec.
Keppel REIT’s distributable income announced a 1.9% drop in distributable income to S$160.6 million for the first nine months of the fiscal year, mainly due to higher borrowing costs. This includes an anniversary distribution of S$15 million, unchanged from the same period last year. Net property income (NPI) for the first nine months grew 10.8% to S$148.5 million, from S$134 million. The growth was attributed to strong operational performance with higher occupancy at Singapore’s Ocean Financial Centre and Tokyo’s KR Ginza II as well as contributions from the REIT’s office buildings, namely 2 Blue Street and 255 George Street in Sydney, Australia.
Suntec REIT reported an 11.2% drop in distributable income for its 3Q ended 30 Sep to S$46.2 million. NPI was down 5.7% at S$79.8 million. As a result, DPU fell 11.9% to S$0.0158 which was attributed to the completion of a S$5.8 million capital distribution which concluded in end-2023. Revenue dropped 4.6% to S$117.7 million due to lower contributions from Suntec City Convention Centre, an office building in Australia and another office building in the United Kingdom. This was offset by the strong performance of Suntec City’s office buildings, which saw a 14% positive rental reversion in Q3, surpassing market levels in the core Central Business District (CBD). Committed occupancy stood at 99.9%.
Mapletree Pan Asia Commercial Trust (MPACT) reported an 8.5% drop in NPI for its 2Q ended 30 Sep to S$167.7m and a 6.1% fall in revenue to S$225.6m following Mapletree Anson’s divestment on Jul 31, 2024, lower contributions from overseas assets and the strengthening Singapore dollar. The amount available for distribution to unitholders declined 11.9% year on year to S$104 million which meant DPU fell 11.6% to S$0.0198. For the half-year ended Sep 30, DPU was 7.9% lower at S$0.0407.
Investing with Insight: Watch this Week’s Technical Outlook
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