Markets drift higher in quiet trading ahead of next FOMC

Date: April 24, 2023

  • The STI added 19 points or 0.6% at 3,321.82 in quiet trading
  • Singapore’s NODX contracted for 6th straight month in March
  • STI generated 2.4% return in first 15 weeks of 2023: SGX
  • Keppel reported 9% rise in 1Q revenue to S$2.3b
  • ASTI said proposed EGM to remove directors is invalid
  • Market currently pricing in 89% probability of 25-points rate hike at next FOMC


A mixed week for the STI but it ultimately finished higher

The Straits Times Index fell for two sessions last week but the gains from the other three days were sufficient for the index to record a net rise of about 19 points or 0.6% at 3,321.82.

Over on Wall Street, a mixed earnings reporting season meant that the stock market also underwent a relatively directionless week, possibly as traders await the outcome of the next US Federal Open Markets Committee meeting on 2-3 May.

Trading volume here was therefore subdued but picked up slightly on Thursday and Friday when daily value done managed to cross the S$1b mark. As a result, average turnover for the week per day was S$949m versus S$802m the week before.

Singapore’s NODX contracted for sixth straight month in March

Singapore’s non-oil domestic exports (NODX) contracted for a sixth consecutive month in March, falling 8.3 per cent, with both electronics and non-electronics seeing a decline. However, it was better than the media 19.4% fall forecast by economists in a Bloomberg poll.

The drop marked a slowdown from a 15.8 per cent contraction in February and 25 per cent in January.

According to data released by Enterprise Singapore on Monday, electronic product exports fell by 22.3 per cent in March, easing slightly from 26.5 per cent the previous month.

The Business Times quoted UOB senior economist Alvin Liew as anticipating “a few more months’’ of year-on-year declines in the first half before improvements are seen in the second half.

Maybank said “Exports to China (-14.1%) failed to provide a lift, while US (+13.2%) and South Korea (+3.1%) were the few bright spots in March. We maintain our 2023 NODX forecast at -7% to -4% and GDP forecast at +0.8%, as global demand will likely stay weak amid tight monetary policy in advanced economies and vulnerabilities in the financial system’’.

Last Friday the Monetary Authority of Singapore (MAS) left its monetary policy unchanged, pausing a series of tightening moves since October 2021 to tackle rising inflation. The central bank flagged the risk of a “deeper than anticipated” slowdown in the Singapore economy amid higher risks to global growth.

How the market has performed so far this year

According to SGX Research, the STI generated a 2.4% total return over the first 15 weeks of 2023, with 20 gainers, one stock unchanged and nine decliners.

“The five strongest performers of the STI in the YTD included Sembcorp Ind, Keppel Corp, Genting Sing, Keppel DC REIT and Mapletree Log Tr, with the five stocks averaging 22% total returns, while the decliners were led by CityDev, YZJ Shipbldg, ThaiBev, Singtel and HongkongLand, which averaged a 6% decline in total returns’’.

“With a combined market capitalisation of S$509 billion, together the 30 STI stocks averaged daily trading turnover of S$855 million over the first 15 weeks of 2023, while booking S$2.0 billion of net institutional outflow’’ said SGX Research.

Keppel’s 1Q revenue was 9% higher at S$2.3b

Keppel Corp last week reported a 9% increase in revenue for the quarter ended 31 March 2023 to S$2.1b versus the same period in 2022.

It did not report a net profit figure but noted that the figure was significantly higher due to the disposal gain of S$3.3b from the merger of its offshore and marine unit and Sembcorp Marine.

Excluding discontinued operations and the disposal gain, net profit for the quarter was slightly higher year-on-year, driven by a stronger performance from its energy and environment, urban development and connectivity segments said Keppel.

Keppel chief executive Loh Chin Hua noted that the company has achieved its 3-year asset monetisation target ahead of schedule, with over S$4.9b announced since Oct 2020. He expects a new interim monetisation target to be unveiled in May as the upper bound of the S$3-S$5b range will be exceeded by year-end.

ASTI says proposed EGM to remove directors is invalid

Watch-listed semiconductor company Asti Ltd said that a proposed extraordinary general meeting (EGM) by a group of shareholders is invalid and urged shareholders not to attend as even if any resolutions were passed would also be invalid.

The company said this is because the requisitioning shareholders did not despatch printed copies of the EGM’s notice at least 21 days before 5 May – the date the EGM is to be held.

The group of shareholders is looking to remove four Asti directors and intend to elect five new ones to the board.

US companies reported mixed results

On Tuesday, Goldman Sachs posted revenue that missed Wall Street expectations, with much of the miss coming from the bank’s trading division. The stock was down 1.7%. Bank of America, however, reported earnings and revenue that topped analysts’ estimates.

“If earnings continue to impress, too much of a good thing will ultimately prove to be inflationary and that will likely mean more Fed tightening. So this stock market rally might struggle to extend beyond the February highs,” Edward Moya, senior market analyst at Oanda, wrote Tuesday.

What might the Fed do at its May meeting?

In an interview with CNBC Tuesday, Atlanta Fed President Raphael Bostic said the Fed should lift interest rates once more, then hold steady “for quite some time.”

“I don’t think that inflation is going to come down quickly. It’s going to take some effort and a resoluteness on our part,” Bostic said. “So once we get to that point, I don’t have us really doing anything but monitoring the economy for the rest of this year and into 2024.”

The federal funds futures market is currently pricing in an 89% chance that the Fed will raised rates by 25 basis points at its May meeting.

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