Monthly Market Wrap: A bullish Wall St did not have much effect here

Date: December 4, 2023

  • The STI added only 5 points to 3,072.99 despite a strong Wall St
  • Most days volume was poor but jumped to S$1.9b on 30 Nov
  • Singapore’s market cap rose 0.1% to S$750b
  • Singtel to follow SIA to be traded in Thailand
  • Manulife US REIT plans asset divestments and loan from sponsor to fix breaches
  • VTAC’s shareholders vote for 17Live merger; almost all independent shareholders opt for redemption
  • Keppel Corp to buy European real estate manager Aermont; analysts positive
  • ESR sued Quarz over alleged defamation
  • Cordlife Group’s shares take a beating after news that it has damaged customers’ stored cord blood units


The STI looked like it might break above 3,200 but finished below 3,100

The Straits Times Index (STI) started the month looking like upward momentum, largely thanks to a firm Wall Street from the end of October, would enable it to rise above the 3,200 mark.

However, after closing at 3,180.53 on 6 Nov, the momentum was lost and thereafter it found itself struggling to hold on to 3,100.

Even a strong Nov rally for Wall Street stocks and bonds, underpinned by a growing belief that the US Federal Reserve is done raising interest rates, did not translate to gains here. By the end of the month, the STI had only managed a 5 points or 0.16% gain at 3,072.99.

As the month progressed, volume grew alarmingly lower, possibly as more participants threw in the towel and left early for the holiday season. The lowest daily volume for the month – and possibly even the year – was recorded on 24 Nov when S$517.3m was transacted.

Volume jumped on 30 Nov to almost S$1.9b

However, thanks to likely “portfolio rebalancing’’, turnover on the last trading session for the month on Thursday, 30 Nov shot up to S$1.85b. Much of this was concentrated in the three banks, Singtel and Keppel Corp whose total volume done that day added up to S$480m or about one quarter of the business done that day.

Only Keppel and Singtel benefited from this late flurry, the former rising S$0.24 or 3.7% to S$6.67 on volume of 15.5m whilst the latter added S$0.02 at S$2.31 on turnover of 40m. The three banks on the other hand, all finished that day weaker.

US Treasury yields and interest rate expectations fell

Dovish signals from the Fed reinforced what traders have been pricing in since the end of October, when the central bank held rates for the second consecutive meeting and a dot plot – that suggested one more hike – was called into question.

Since then, stocks have risen at a rapid clip, with the S&P 500 (SP500) climbing out of correction territory in only 16 trading sessions, marking its fastest comeback since the 1970s.

Besides lifting markets and risk assets, the prospect of cheaper money saw the 10-year Treasury yield drop overnight to 4.27% last Wednesday, after touching 5.00% just prior to the last Fed meeting.

On Tuesday last week, normally hawkish Fed governor Christopher Waller told the American Enterprise Institute think tank that policymakers are growing more comfortable with their actions so far.

“I am increasingly confident that policy is currently well positioned to slow the economy and get inflation back to 2%,” he said, and also “reasonably confident” of doing so without a sharp rise in the unemployment rate, now at 3.9%.

If the decline in inflation continues “for several more months … three months, four months, five months … we could start lowering the policy rate just because inflation is lower,” he said. “It has nothing to do with trying to save the economy. It is consistent with every policy rule. There is no reason to say we will keep it really high.”

Singapore’s market cap rose 0.1% to S$750b

There were 619 companies listed in the local market in Nov versus 621 in Oct. In total, these had a market capitalization of S$750b, 0.1% more than Oct’s S$749.4b.

The market value of the 30 STI components fell 1% to S$503.4b, which is 67% or two-thirds the entire market’s capitalisation. Catalist’s market cap fell 0.1% to S$7.6b.

Singtel to follow SIA to be traded in Thailand

Singtel will be the second Singapore stock to be traded on the Stock Exchange of Thailand (SET) under the expanding Thailand-Singapore Depository Receipt (DR) linkage scheme.

This was announced by Singapore Exchange (SGX) chief executive Loh Boon Chye at an event in Bangkok, where he said this will likely take place some time in 2024. It will be an important step towards the enhanced integration of South-east Asia’s stock markets.

SGX and SET began their exchange-level DR cooperation – the first of its kind in South-east Asia – in 2021. On May 30 this year, three major Thai stocks – Airports of Thailand, 7-11 operator CP All, and oil and gas giant PTT Exploration and Production – began trading on the SGX via the DR linkage.

The DR on Singapore Airlines made its debut on the Thai stock market in September this year.

Manulife US REIT plans asset divestments and loan from sponsor to fix breaches

Manulife US Real Estate Investment Trust (MUST) plans to raise funds through a mix of asset dispositions and a sponsor-lender loan to remedy its financial covenant breach, said its manager last week.

The recapitalisation plan – which requires shareholders to vote on three inter-conditional resolutions at an upcoming extraordinary general meeting (EGM) – seeks to “revitalise” the REIT and provide more time for the manager to sell assets and realise value.

However, distributions would continue to be halted until December 2025. The distributions could resume if the REIT meets “early reinstatement conditions” which are similar to the regulatory leverage limits in Singapore.

In July, MUST breached existing financial covenants after portfolio valuations fell 14.6% affecting its ability to pay out distributions. The REIT proportion of unencumbered debt to unencumbered assets exceeded the 60%  threshold, while its aggregate leverage also crossed the 50% regulatory gearing limit.

As part of its recapitalisation plan, the REIT will divest its Park Place property in Arizona to its sponsor, which will result in net proceeds of US$98.7 million. Its sponsor will also grant a six-year US$137 million loan at an interest rate of 7.25%, paid quarterly, with an exit premium of 21.16% on maturity. This translates to an effective interest rate of 10% per annum.

VTAC’s shareholders vote for 17Live merger; almost all independent shareholders opt for redemption

Vertex Technology Acquisition Corp (VTAC) shareholders will redeem close to two-thirds of the share capital of the special-purpose acquisition company (Spac) whilst simultaneously approving the Spac’s business combination with e-commerce streaming company 17Live.

Shareholders have exercised their redemption right for some 26 million shares as at the redemption record date, which amounts to about 62.5% of the company’s issued share capital of 41.6 million shares, VTAC said in a statement on Friday.

Excluding the holdings from two VTAC shareholders – Vertex Co-Investment Fund (Vertex SPV) and Venezio Investment – which had committed not to redeem their shares, the redemption rate would be 87.9%.

Keppel Corp to buy European real estate manager Aermont; analysts positive

Keppel Corporation has agreed to acquire an initial 50% stake in European real estate manager Aermont Capital, for a consideration of up to 356.9 million euros (S$521.8 million).

This includes a deposit upon entering the agreement, a closing amount, and post-closing adjustments. It plans to subsequently acquire the remaining shares in the European real estate manager, for a maximum of 575 million euros. That brings the maximum consideration for the acquisition to 931.9 million euros.

The base of the consideration is contingent on Aermont’s performance, said Keppel, adding that the two have yet to agree on a multiple which would determine the price of the acquisition.

This will give Keppel “an immediate and strong foothold in Europe” and expand its presence beyond Asia-Pacific, said Keppel chief executive Loh Chin Hua at a virtual briefing on the acquisition.

The first tranche of the acquisition, expected to be completed in the first half of 2024, will be funded through a combination of cash and treasury shares acquired through Keppel’s earlier share-buyback programme, Keppel pointed out.

It intends to proceed with acquiring the remaining shares in Aermont in 2028.

Keppel’s shares jumped a total of S$0.42 or 6.5% on Thursday and Friday to S$6.85.

Macquarie Equity Research and UOB Kay Hian said the deal would significantly boost Keppel’s funds under management and growth. Macquarie continued to rate Keppel an “outperform’’ with a S$7.88 price target, whilst UOB Kay Hian maintained its “buy’’ with S$9.09 target.

ESR sued Quarz over alleged defamation

ESR Group, which is the sponsor of Sabana REIT, on 31 July filed a lawsuit together with E-Shang Infinity Cayman company ESR alleging that activist investor Quarz Capital made defamatory statements during the latter’s push to internalise the management function of Sabana REIT.

The case is currently ongoing before the Supreme Court, with the next case conference scheduled for Dec 5. The defendants are Quarz Capital Asia (Singapore), Quarz Capital Management as well as three Quarz employees – head of research Havard Chi, chief investment officer Jan Moermann, and general manager Klaus Wille.

Earlier this year, ESR Group and Quarz were embroiled in a public battle over the internalisation of the Reit management function of Sabana Reit, with both parties issuing multiple statements that touched on the merits and risks of internalisation.

In June, Quarz requisitioned an extraordinary general meeting (EGM) to pass two resolutions relating to the internalisation. It said that this would bring benefits to unitholders by providing cost savings once the external manager is removed. Its letter also highlighted its concerns over matters of corporate governance.

The claimants have alleged that words or statements published in the lead-up to the EGM have brought ESR Group’s name into disrepute and lowered its standing in the eyes of the public and are therefore defamatory.

It added that the defendants had “falsely and maliciously” published statements in relation to Sabana REIT in an attempt to garner unitholder votes at the EGM.

On Aug 7, unitholders of Sabana Reit voted in favour of internalisation. The Reit’s trustee is in the process of setting up the new internal manager. Quarz has said it will “vigorously resist’’ the claims.

Cordlife Group’s shares take a beating after news that it has damaged customers’ stored cord blood units

On Friday, Cordlife Group’s shares crashed S$0.145 or 32% to S$0.31 on volume of 1.26m units after news on Thursday that the Ministry of Health has issued a six-month suspension to the company after finding that seven of Cordlife’s 22 cord-blood storage tanks were kept at temperatures above acceptable limits.

Cordlife, one of five private cord-blood banks in Asia, has been barred from collecting, testing, processing and storing new cord-blood or tissue samples during that period.