Date: July 26, 2021
- The Straits Times Index first fell, then rebounded to record a net gain of 5 points at 3,157.05 last week;
- Rising virus numbers led to the fall, Wall St’s gains helped the rebound;
- All 3 major US indices closed at record highs on Friday;
- 10-year US Treasury yield fell below 1.2% but ended week at 1.29%;
- US President Joe Biden said inflation is “temporary’’;
- Singapore’s return to May’s restrictions poses downside risk;
- SPH’s media revenue in secular decline;
- IFA said CapitaLand’s restructuring is “fair and reasonable’’;
- High Court grants winding-up order for Hyflux
A plunge early in the week…
Last week could best be divided into two halves when a plunge on Wall Street because of concerns over the spread of the Delta variant of the Covid-19 virus combined with news of Singapore’s return to Phase 2 to put pressure on local stocks, at least during the first few days.
In the second half however, a Wall St rebound helped the local market recoup all of its earlier loss, the net result being a 5-points gain for the Straits Times Index at 3,157.05.
On Monday, the eve of the Hari Raya Haji public holiday, the STI plunged 41 points to 3,111 after news of a sharp rise in local Covid-19 cases originating from KTV lounges and Jurong Fishery Port which led to concerns that there would be yet another shutdown. As it turned out, the Government later announced a return to May’s restrictions which will be in place until 18 Aug.
Later that day, Wall Street had its worst session in months when the Dow Jones Industrial Average slid 726 points or 2.1%. It was its largest loss since October 2020. Meanwhile, a flight to safety on that day meant the yield on the 10-year Treasury dipped below 1.2%, the lowest since February.
The reasons for the US market’s nervousness were rising virus numbers around the world as well as in the US, unsureness over the strength of the US economic recovery, inflation and what the US Federal Reserve’s next move might be as far as interest rates are concerned.
Followed by a rebound later
However, the US market managed to recover all of this loss in the following days, rising on four consecutive sessions, and on Friday all three major indices closed at record highs. Observers attributed these gains to “buying the dip’’, strong earnings reports and slightly weaker-than-expected economic numbers which suggested the Fed might not be in a hurry to raise rates.
On Friday the Dow Jones Industrial Average rose 238 points or 0.7% and closed above 35,000—a milestone it’s approached six times before–after crossing the 30,000 level in November 2020.
The S&P 500 and the Nasdaq Composite were both up 1%, new records as well, and climbed 2% and 2.8%, respectively, for the week. The 10-year Treasury yield, which usually rises and falls with expectations for economic demand and inflation, rose to 1.29% from 1.26%.
US inflation is only temporary: President Joe Biden
US President Joe Biden on Tuesday described US inflation as “temporary’’ and not a long-term problem as he called for Congress to approve additional federal spending in the form of a major bipartisan infrastructure package. He said the injection of trillions into the economy would “take the pressure off inflation’’ rather than increasing it.
Singapore’s return to May’s restrictions could dent growth
Private sector economists said a return to May’s restrictions are undeniably a setback to Singapore’s recovery. OCBC chief economist Selena Ling was quoted in The Business Times on Wednesday saying there is now downside risk to Q3’s forecasts.
However, she added that it might not be as bad as the “circuit breaker’’ period of Q2 last year since several activities are still allowed.
Maybank Kim Eng senior economist Chua Hak Bin was quoted saying he was keeping his full-year growth forecast of 6.8% for now, adding “manufacturing has been driving the recovery and has not been dampened by the lockdowns’’.
SPH’s media operating revenue in secular decline, down 16.8% for first 9 months
Singapore Press Holdings reported in a business update for Q3 that media operating revenue fell 16.8% year-on-year for the first nine months of 2021 to S$286.7m.
This was led by a decline in newspaper print advertising revenue, which fell 17.6% year-on-year. The company said “underlying secular decline continues to impact newspaper print ad revenue, even as the overall economy recovers from the worst of Covid-19’’.
SPH said the extraordinary general meeting to seek shareholder approval to restructure its media business is expected between August and September. Once the approval is secured, it expects the restructuring to be completed by the end of the year. Its shares were unchanged at S$1.80 after the announcement on Monday and they ended the week at S$1.85.
CapitaLand’s new targets, IFA said restructuring is “fair and reasonable’’
CapitaLand said in an update on its proposed restructuring that it aims to have funds under management (FUM) of S$100b by 2024 and to grow its lodging business to 160,000 units under management by 2023. It said it is confident of achieving those targets which represent an increase from S$78b FUM and 123,000 units in 2020.
In March, CapitaLand proposed to split its business into a privately held development arm and a new, listed unit for investment management platforms and lodging.
On Monday, it was reported that the independent financial adviser has deemed the revamp plan “fair and reasonable’’ from a financial point of view, adding that independent directors may wish to advise shareholders to sell their shares in the open market is they can get a higher price.
High Court grants winding-up order for Hyflux
On Wednesday, the High Court granted an order to wind up water treatment firm Hyflux, ending a saga that stretches back to May 2018 when the company first applied for a court-supervised debt restructuring.
The order comes after a last-ditch intervention by Middle East investor Utico failed to meet the minimum conditions set by SIAS. Among these conditions was that Utico place a non-refundable deposit of S$10m in an escrow account to confirm its plans to restructure Hyflux.
