Monthly Market Wrap: Flirting with the 3,600 level

Date: November 1, 2024

• With no real direction from overseas, stocks traded sideways for Oct
• The STI was stuck in a narrow band 3,573-3,640
• For the month, the index fell 0.8% to 3,558.88
• Conflict in Middle East, concerns over US presidential elections were main focus
• US Treasury yields spiked up, 2-year and 10-year yields now above 4%
• Sabana unitholders voted for requisitionists’ directors, ignoring advice of proxy advisers
• Dyna-Mac shareholders should accept the S$0.67 offer: IFA & Maybank
• Wilmar’s Q3 profit down 19% to US$254.4m

 

Stuck in a narrow trading range

With little in the way of domestic or overseas factors on which to capitalise, the local stock market spent the month of October trading in sideways fashion. Movements in the Straits Times Index reflected this lack of direction, the index constantly flirted with the 3,600 mark and trading within a narrow band between a low of 3,573 on 11 Oct to a high of 3,640 on 18 Oct before ending at 3,558.88 for a nett loss of 27 points or 0.8% for the month.

This performance was in stark contrast to September when the US Federal Reserve slashed its interest rates by a higher-than-expected 50 basis points, sending the STI up 4.2% for the month.

Among the banks, DBS and OCBC rose for the month, the former gaining S$0.61 or 1.6% at S$38.66 and the latter S$0.09 or 0.6% at S$15.19. UOB slipped S$0.01 to S$1.90 whilst Singtel lost S$0.11 or 3.4% at S$3.13.

How Wall St fared

For the month, the Dow fell about 1%, while the S&P 500 dipped 0.5%, both snapping five-month winning streaks. The Nasdaq dipped 0.5% on the month, ending a two-month winning streak.

Major external events during Oct

Iran’s attack on Israel

The month kicked off with markets wobbling under the weight of elevated oil prices after Iran fired a barrage of missiles at Israel, adding more fuel to an already-fiery Middle East situation.

However, in keeping with how markets have reacted to heightened geopolitical risk in recent years, stocks soon regained their poise, led by Wall Street, whose attention turned to third quarter earnings and interest rate expectations.

Bond yields spiked up; 2-year and 10-year US Treasuries above 4%

On the US inflation and interest rate front, perhaps the most significant development was the spike up in US Treasury yields in the final two weeks. This was reportedly brought on by various factors, though most reports attributed this to concerns over potential inflationary policies that might be introduced by the eventual winner of the upcoming US presidential election.

Whatever the case, both the 2-year and 10-year Treasury yields rose above the 4% level in the past fortnight, thus injecting some caution into trading. The 2-year yield, which is seen as the main barometer for expectations of the federal funds rate, on Wednesday touched 4.2% versus the 2024 low of 3.5% in September.

The 10-year gained 0.484 percentage point this month, to 4.282%. The two-year rose 0.514 percentage points, its highest monthly gain since February 2023, to 4.162%. Both snap a streak of five consecutive monthly declines.

US election uncertainty, geopolitical risk pushed gold to record highs

Gold prices rose in the final days of the month, this week touching a fresh high of US$2,784 per troy ounce.

Gold appears to be gaining on U.S. presidential election uncertainty and geopolitical tensions, as well as U.S. interest rate cut expectations, market watchers say.

Main local corporate events

Sabana unitholders voted for requisitionists’ directors, ignoring advice of proxy advisers

The six candidates proposed by a group of requisitionists were voted by unitholders to be board directors of the newly internalised manager of Sabana Industrial Real Estate Investment Trust (Sabana REIT) at an extraordinary general meeting last month.

This was counter to the advice given by proxy advisers Glass Lewis who earlier had recommended that unitholders should instead vote for the three directors proposed by Sabana REIT’s trustee.

Dyna-Mac shareholders should accept the S$0.67 offer: IFA & Maybank

Dyna-Mac’s independent financial advisor (IFA), ZICO Capital deemed Hanwha’s latest offer of S$0.67 per share versus the earlier S$0.60 to be “fair and reasonable”. As such, it recommends the company’s shareholders to “accept” the offer.

This was in line with an earlier recommendation by Maybank which during the month represents a fair exit price “for shareholders to realise their investment and reinvest into other undervalued counters”.

Noting that the offer price exceeds Maybank Securities’ S$0.64 target price, Maybank had said: “We think that the offer is fair, and shareholders should accept the offer even though we are currently in a floating production storage and offloading upcycle’’.

Wilmar’s Q3 profit down 19% to US$254.4m

Agribusiness firm Wilmar International reported a 19% drop in net profit for the third quarter ended Sep 30, 2024, to US$254.4 million.

Its core net profit – which excludes contributions from joint ventures and associates, as well as non-operating gains recognised from the group’s investment securities – declined more sharply, down 35.7% year on year to US$208.1 million.

Revenue was largely steady, edging up 0.4% to US$17.7 billion in the latest quarter. This was due to lower commodity prices, even though sales volumes grew in both the food products as well as feed and industrial products segments.

For the year to date, Wilmar reported a net profit of US$834 million, down 3.6%. Core net profit slid 9.6% to US$814.4 million whilst revenue for the nine months also fell, down 3% at US$48.7 billion.

“The group achieved a reasonable set of results despite the challenging operating environment across most of our businesses during Q3 2024,” Wilmar noted. “With the forecasted improvements in palm production, refining margins for tropical oils are expected to improve whilst crushing margins for soybean are expected to remain positive.”

 

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