Led by the banks, the STI added 2.3% for the week, but in low volume

Date: September 18, 2023

  • A quiet week ahead of US CPI data ended with a push on the banks
  • The STI gained 73 points or 2.3% at 3,280.69
  • The 3 banks gained 3-3.8% and accounted for 26% of volume on Friday
  • US consumer and producer price data suggested the Fed will stay its hand at this week’s FOMC but will also stay the course
  • Listed SGX companies reported 16.7% increase in quarterly profits
  • Olam’s shares plunged after Nigerian unit posted bond for its director
  • Worst could be over for SGX-listed chip makers: analysts


A relatively quiet week marked by a late push on the banks

Activity in the local stock market last week ground to a virtual standstill for the first three days, with the Straits Times Index trading within a tight band most of the time as traders waited for Wednesday’s release of US consumer price data and Thursday’s producer price index, as well as this week’s US Federal Open Markets Committee (FOMC) meeting.

Activity here mirrored that on Wall St, where players also waited for Wed’s data. Turnover here was therefore weak, hovering well below the S$1b mark between Monday and Wednesday.

On Thursday however, the STI jumped almost 31 points or about 1%, led mainly by the banks, all three of which rose sharply. Even so, volume that day was below S$1b at S$916.8m but on Friday, gains in the banks again drove the index higher by a further 31 points, this time on higher volume of S$1.71b.

For the week, the STI recorded a rise of 73 points or about 2.3% at 3,280.69 whilst average volume, which was boosted by Friday’s elevated turnover, amounted to S$949 million.

Banks were the main drivers of the index. DBS gained S$1.01 or 3% at S$34.24, UOB added S$0.92 or 3.3% at S$29.20 whilst OCBC rose S$0.47 or 3.8% to S$12.90. On Friday, the value of trades done in the trio amounted to S$444.5m or 26% of the entire market’s turnover.

US consumer and producer price data suggested the Fed will stay its hand but also stay the course

August inflation data released on Wednesday showed inflation continued to cool mildly from the sky-high price gains that have plagued consumers and policy makers over the past two years.

Core prices, which exclude the volatile food and energy indexes and are considered the better gauge of underlying inflation, rose 0.3% over the month and decelerated to a 4.3% annual pace in August, reaching the lowest level since September 2021. Economists had expected a 4.4% increase.

However, a spike in gasoline costs over the month drove up the headline consumer-price index, leading to a 0.6% jump, the largest such increase in more than a year. That, in turn, pushed the headline index to a 3.7% year-over-year increase, up from July’s 3.2% pace and slightly above economists’ expectations of 3.6%.

On Thursday came news that US producer prices rose 0.7% in August, topping expectations. Retail sales rose 0.6% month over month in August, compared to expectations for a 0.1% increase.

And the European Central Bank increased interest rates by a quarter point—but hinted it may not need to raise them further.

Investors on Thursday also cheered the Nasdaq debut of Arm Holdings. The British chip designer opened 10% above its IPO price.

Overall, the gradual slowdowns, combined with recent softening in the labour market, will likely keep Fed officials on track to hold interest rates steady at the current 5.25% to 5.5% level when they meet this Tuesday and Wednesday.

Markets are expecting the Fed to stay put, with the probabilities of a pause in September coming in at 97% after the data was released, according to the CME FedWatch Tool. On Friday, this rose to 99%.

However, recent comments from Fed policymakers have suggested they could still raise interest rates another quarter-point this year, a move they had pencilled in when they last wrote down forecasts in June. If the central bank holds rates steady at this week’s meeting, they could still raise them again during policy meetings in November or December.

Listed SGX companies reported 16.7% increase in quarterly profits

The Business Times on Tuesday reported that the 82 SGX-listed companies that released quarterly results in June reported aggregate profits of S$7.1b, a 16.7% increase year-on-year.

Of the 82, 57 were in the black whilst 25 reported losses. Of the 57 that reported profits, 8 had previously reported losses whilst of the 25 which reported losses, 4 had previously made profits.

CGS-CIMB Securities noted that companies with improved earnings were from the sectors of finance, capital goods (except for Seatrium due to higher-than-expected provisions), transport, gaming and healthcare.

Olam’s shares plunged after Nigerian unit posted bond for its director

Shares of Olam Group dived on Wednesday morning after the group confirmed a media report that its Nigerian unit posted a bond for its director, Prakash Kanth.

Within the first hour, the counter had sunk as much as S$0.11 or 9.6 per cent to S$1.04 amid heavy trading volumes. This was its lowest share price since its return to SGX as Olam Group on Mar 16, 2022, following its last day of trading as Olam International after its restructuring.

It recovered slightly to finish the day at a 52-week closing low of S$1.07, a loss of around 4.3%. Olam’s shares ended the week at S$1.08.

The company had announced that its subsidiary Olam Nigeria posted a bond for Kanth to “secure his continued cooperation …with any legitimate requests from relevant Nigerian authorities for information or assistance’’.

The statement followed an 11 Sep report in the Daily Nigerian which stated that Olam Nigeria had paid a “humongous’’ bail bond of one billion nairas (S$1.9 million) to secure Kanth’s release from remand by the state’s security service in connection with an ongoing money laundering investigation.

Worst could be over for SGX-listed chip makers: analysts

The Business Times on Friday quoted analysts saying the worst could be over for local chip makers after a dismal first half in which tech companies saw their earnings fall by 39.4% year-on-year and 36.3% half-on-half.

CGS-CIMB analyst William Tng attributed this to the high base effect as these companies reported record profits in FY2022, a slowdown in the semiconductor industry and a generally weak economy in the first half. He remains “neutral’’ on the sector.

Also neutral is RHB’s Alfie Yeo, who noted that the good run enjoyed prior to these six months led to an oversupply of chips in 2023. “In general, results of companies supporting the semiconductor supply chain and production have not been encouraging due to oversupply and lower semiconductor production’’ he said.

S&P Global Market Intelligence said based on consensus estimates, the 13 chipmakers that it tracks will continue to see revenue declines on a year-on-year basis until the fourth quarter.

Maybank’s Jarick Seet said most players apart from Frencken Group did worse than expected. He said Frencken’s management has guided for higher half-on-half semiconductor revenues in the second half and that the worst is probably over. He also pointed out that Frencken is one of a few semiconductor stocks that trades below its net asset value.

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