Date: March 25, 2024
- As expected, the US Fed kept rates on hold – but signalled 0.75% cut this year
- Wall St’s major indices set new all-time highs on Wed and Thursday
- Bond yields fell, probability of first rate cut in June is 66.5%
- In a surprise move, Swiss central bank cut interest rates by 0.25%
- STI regained the 3,200 level with a 45-points or 1.4% rise to 3,217.97
- Analysts: Singtel unlikely to sell Optus – yet
- Top Glove narrowed 2Q loss, expects to be in the black by FY2025
- Four Cordlife directors, former group chief arrested amid CAD probe
- Two sets of Cordlife’s substantial shareholders now locking horns
The Fed kept rates unchanged – but signalled around 3 cuts this year
The main market-moving event of the week was the US Federal Reserve’s Federal Open Markets Committee (FOMC) meeting, at which the US central bank lived up to expectations by keeping interest rates unchanged.
However, its officials also signalled that they are fairly sure that during the course of the year, the US will get to the point where inflation is moving sustainably toward the 2% target, making it appropriate to lower interest rates.
“Markets believe we will achieve that goal and they should believe that because that’s what will happen over time, but we stress over time,” Fed Chair Jerome Powell said Wednesday.
Officials also signalled that they expect to cut interest rates by three-quarters of a percentage point by the end of the year, sticking with an earlier forecast despite recent mixed economic data, including hotter readings on inflation over the past two months.
The Dow Jones Industrial Average, S&P 500, and the Nasdaq Composite all marked record closes for the first time since 2021 on Wednesday after the meeting. They rose to new highs on Thursday but finished mixed on Friday.
The STI responded by regaining the 3,200 mark lost on 23 Feb
The impact here was swift and immediate, with the Straits Times Index jumping almost 43 points or 1.4% on Thursday, its biggest one-day rise since 16 February.
Slight weakness set in on Friday but the index still managed to keep its nose above the 3,200 level with a net gain of 45 points or 1.4% for the week at 3,217.97. The last time the STI closed above 3,200 before falling below this mark was 23 Feb.
Average daily volume was S$1.074b, boosted by the 1.59b units worth S$1.47b done on Thursday.
US bond yields fell, probability of 25-pts rate cut in June is 66.5%
Bond yields fell, with the 10-year note on Wed down to 4.276% from 4.298% a day before. It fell further as the week wore on, ending Friday at 4.213%.
On the CME’s FedWatch tool, odds of another hold in May are priced at 87.5%, while odds of an initial cut in June are now at 66.5% for a 25-basis points cut and 9% that it might be 50 basis points. Fed fund futures for December matched the FOMC’s 4.6% forecast.
Swiss central bank cut interest rates by 0.25%
The Swiss National Bank (SNB) cut its main interest rate by 25 basis points to 1.50% on Thursday, a surprise move which made it the first major central bank to dial back tighter monetary policy aimed at tackling inflation.
A majority of analysts polled by Reuters had expected the usually conservative SNB to keep rates on hold at 1.75% and wait at least another three months before moving.
Analysts: Singtel unlikely to sell Optus – yet
Earlier this month Singtel denied speculation that it was in talks to sell its stake in Australian subsidiary Optus, adding that Optus remains a integral and strategic part of Singtel’s group.
The Business Times last week reported that most analysts believe that such a sale is unlikely for now and that Singtel remains undervalued.
“While we do not expect Singtel to sell a substantial stake in Optus, we also do not discount a potential stake sale in Optus should a strategic partner emerge,” UOB-Kay Hian analysts Chong Lee Len and Llelleythan Tan were quoted as saying.
They added that, at about A$16 billion (S$14 billion) to A$18 billion in enterprise value, Optus would be valued at about 7.5 to 8.5 times its earnings before interest, taxes, depreciation and amortisation (Ebitda).
Similarly, OCBC Investment Research analysts believe that while a complete sale of Optus seems unlikely at the moment, Singtel appears to have left the door open for a potential partial stake sale to improve the group’s return on invested capital (ROIC) and unlock value for the company.
They added that Singtel has set a S$6 billion capital recycling target over the next two to three years. After the sale of stake in its regional data centre business and Comcentre – as well as the sale of shares in Bharti Airtel, which was announced in March 2024 – the company will still need to unlock about S$3 billion in capital.
“The proceeds from asset recycling could be used to strengthen the balance sheet and boost shareholder returns,” the analysts said.
RHB research analysts pointed out that in Singtel’s previous announcements, the company has referred to Optus as a long-term strategic investment.
“There is a delicate balancing act here as a potential deconsolidation of Optus could see significant earnings dilution, given that Optus contributes over two-thirds of the group’s consolidated Ebitda,” they added.
Top Glove narrowed 2Q loss, expects to be in the black by FY2025
Top Glove last week said that its losses for its second quarter ended Feb 29, 2024, narrowed by 68.9% to RM51.2 million (S$14.7 million), from RM164.7 million in the corresponding year-ago period.
Revenue for the period, however, fell 11% to RM550.3 million, from RM618 million year on year.
Executive chairman Lim Wee Chai was quoted in BT saying the company to return to the black by FY2025, as Malaysian glove-makers continue to close the price gap with competitors in Thailand and China.
Speaking at Top Glove’s second-quarter earnings briefing on Wednesday (Mar 20), Dr Lim noted that Thai and Chinese glove-makers were increasing their glove prices. This has resulted in an overall increase in the average selling prices (ASPs) of the products.
This, in turn, has allowed Top Glove to raise its own prices. It had attempted to do so in the past but was unable to sustain the move due to its non-Malaysian peers’ low prices.
Over the course of the week Top Glove’s shares rose S$0.005 to S$0.23.
Four Cordlife directors, former group chief arrested amid CAD probe
Four of Cordlife Group’s directors and its former group chief executive, Tan Poh Lan, were arrested on Friday and released on bail by the Commercial Affairs Department (CAD).
The troubled cord-blood bank said this was related to an offence connected to potential breaches of disclosure obligations by Cordlife.
Its directors who were arrested and are out on bail are acting chairman Ho Choon Hou; independent directors Yeo Hwee Tiong and Titus Cheong; and non-independent, non-executive director Chow Wai Leong.
Cordlife said its chief financial officer Thet Hnin Yi was asked to assist with CAD’s investigations but was not arrested, placed on bail, or charged with any offence to date. CAD and the Monetary Authority of Singapore have further issued a Mar 19 notice for certain Cordlife directors to attend an Apr 2 interview at CAD’s offices.
Cordlife was recently thrust into the spotlight after the Ministry of Health (MOH) began investigations into the company’s processes.
In November last year, the mainboard-listed healthcare provider was slapped with a six-month suspension notice by MOH, after it was found to have kept some cord-blood tanks at above acceptable temperature limits.
On Friday, Cordlife’s shares resumed trading after a trading halt. They fell S$0.026 or 11.6% to S$S$0.199 on volume of 257,000.
Two sets of Cordlife’s substantial shareholders now locking horns
Earlier in the week, Cordlife said that it received a notice on Mar 14 from Phillip Securities as nominee for one shareholder, Nanjing Xinjiekou Department Store which owns about 20.3% of Cordlife, requesting the board convene an extraordinary general meeting (EGM).
In the notice, there were seven ordinary resolutions. Four concerned the removal of four directors – acting chairman Ho Choon Hou and independent directors Yeo Hwee Tiong, Titus Cheong and Joseph Wong. Wong is also the company’s former chairman, who stepped down in February.
The remaining three concerned the appointment of three individuals to the board – Teo Tong Kooi, Xu Tianhong and Cai Yong.
These moves, if approved, should be effective immediately upon conclusion of the EGM, the resolutions added.
The notice further provides that if the EGM is not convened prior to the upcoming annual general meeting (AGM), it will serve as “a special notice to the company”.
Meanwhile, on Mar 18, the company received a letter from controlling shareholder TransGlobal Real Estate Group, which has a 27.9% stake in Cordlife, requisitioning an EGM to vote on three resolutions.
The first ordinary resolution in the TransGlobal letter was to reject the proposed resolutions in the Mar 14 requisition notice from Phillip Securities.
The other two ordinary resolutions concerned the removal of two non-independent, non-executive directors – Shally Chen, also known as Chen Xiaoling, and Zhai Lingyun.
Both directors were previously nominated to the board by Shanghai-listed Nanjing Xinjiekou Department Store and are involved with the company.
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