Monthly Market Wrap: A decoupling from Wall Street – the STI lost 2.2% whilst US indices ended just below all-time highs

Date: February 1, 2024

  • The STI fell 2.7% even as Wall St racked up several all-time highs
  • The US Fed kept rates unchanged but signalled that inflation is still too high
  • Final test results for Cordlife’s impacted storage units expected at end-March
  • AEM reported inventory shortfall due to human error, SIAS asked for more information
  • Factory output contracted unexpectedly 2.5% in Dec
  • Novo Tellus announced it is to dissolve


“As goes January, so goes the year’’?

There’s an old saying in the stock market that comes to mind at the start of a new year: “As goes January, so goes the year.” It implies that if the market goes up (or down) in January, it will continue to rise (or fall) for the rest of the year.

According to MarketWatch in a 28 Jan 2024 report, a team of stock-market analysts at Bespoke found that typically when the S&P 500 is trading in positive territory for the month so far, that the index continues to climb during the final four trading days of January. And when the index finishes January in the green, the chances of it continuing to advance for the rest of the year improve dramatically.

“Since 1953, the year that the current five-day trading week first arrived in the U.S. stock market, when the S&P 500 was up 2% or more in January, its median performance for the rest of the year was a gain of 13.5%’’ noted MarketWatch.

“Furthermore, the index recorded positive returns for the balance of the year 84% of the time. All told, the index has finished January up 2% or more 31 times between 1953 and 2023, the Bespoke team showed’’.

Wall St closed January just below all-time highs but STI fell 2.7%

For Jan 2024, all three major US indices have posted strong showings. Despite sliding sharply on the last day of January, the major indexes posted gains – the Dow Jones Industrial Average was up 1.2%, the S&P 500 1.6%, and the Nasdaq 1%.

However, the January adage may not necessarily apply to the Straits Times Index. In Jan 2023, the STI recorded a modest gain of 3.5% at 3,365.67 but for the whole year, it lost 0.3% at 3,240.27.

For Jan 2024, the STI lost 87 points or 2.7% at 3,153.01. The only consolation – if it can be called that – was that volume picked up slightly in the latter stages of the month to just over S$1b daily.

The decoupling from Wall St could be for a variety of reasons, one being the exposure the local economy has to a rapidly slowing China which is also acting a drag on the Jardine stocks which contribute a heavy weightage in the STI.

Furthermore, bank profits are assumed to be adversely affected if interest rates are lowered, which is why the banks, which also have a heavy weighting in the index, have not been performing for some time now.

As expected, the Fed kept rates unchanged – but said no cuts yet as inflation is still too high

The Federal Reserve kicked off the year in neutral, opting to keep interest rates unchanged at a meeting of its policy-setting committee on Wednesday.

The call, which was widely expected and unanimous, keeps the target range for the federal-funds rate at 5.25%-5.50%.

The Federal Open Market Committee’s policy statement omitted language suggesting there are more interest-rate increases to come. But policymakers signalled that they are not thinking about cutting rates yet – Fed Chair Jerome Powell began his post-meeting press conference by reiterating that inflation is “still too high,” later adding that a March rate cut wasn’t likely.

Final test results for Cordlife’s impacted storage units expected at end-March

The Ministry of Health (MOH) is estimating that the final results of the tests on Cordlife’s impacted cord blood units (CBU) will be ready by end-March.

In an update on Friday 26 Jan, MOH said the capacity constraints of the laboratory and need for further tests using additional samples from different parts of the tank, as well as an independent verification of the results have led to the estimated end-March timeline.

Preliminary investigations have shown that two of the six affected tanks which stored about 2,300 CBUs are unlikely to be affected by being exposed to suboptimal temperatures.

Cordlife was suspended for a six-month period from collecting, testing, processing and/or storing new cord blood and human tissues from Dec 15, 2023, by MOH after the ministry found lapses in the company’s cord-blood storage facilities, with the temperature in one storage tank reaching 20.4 degrees Celsius, well above the acceptable limits of minus 150 deg C.

MOH has since also found other lapses at Cordlife, such as a new cord-blood processing method which was not properly validated, temperature monitoring systems that failed to send notifications when tanks exceeded acceptable levels and preventive maintenance not being carried out for two tanks. The company has until the end of May to rectify the lapses.

A substantial shareholder of Cordlife, Robust Plan, sold 4.6 million shares on Jan 23, bringing its stake down from 5.47 to 3.67%. With the sale, which netted S$1.5 million, Robust Plan and its beneficial owner Shanghai Dunheng Capital Management ceased to be a substantial shareholder of Cordlife.

AEM reported inventory shortfall due to human error; company queried by SIAS

Semiconductor equipment maker AEM Holdings during the month said that it has found a shortfall in the group’s inventories following an internal stock-taking exercise, which it expects to negatively impact the group’s profitability for FY2023.

As at end-September last year, the group’s inventories were stated to be worth S$358.6 million. This was shared in an investor update released on Nov 9, 2023.

However, a preliminary estimate suggests that the group’s inventories are anticipated to be 5 to 7 per cent lower than this figure, said AEM. It noted that the internal stock-taking exercise is still ongoing, and that it had taken into account “the ordinary and usual course of inventory movement”. It attributed the shortfall to human error.

SIAS president David Gerald called on the company to “clearly state” the potential financial impact on earnings for the full year ending Dec 31, 2023.

He also called for more details on the reasons for the internal stock-taking exercise through which the shortfall was discovered.

“For example, was it a routine exercise or were there any whistle-blowing reports, negative findings from the internal audit or did the group face challenges in fulfilling customers’ orders? When was the board and management first informed of the shortfall?”

The news led many brokers to downgrade the stock. The counter ended 2023 at S3.46 but fell sharply, ending January at S$2.69 for loss of S$0.77 or 22.2%.

Factory output contracted unexpectedly 2.5% in Dec

Singapore’s factory output contracted 2.5% year on year (yoy) in December, dragged down by a double-digit decline in the volatile biomedical sector. The reading registered a decline from the previous month’s revised figure of 0%. It also underperformed against economists’ median expectations of a 1% growth, according to a Bloomberg poll.

For the whole of 2023, Singapore’s factory output declined 4.3%. Excluding biomedical manufacturing, factory output shrank 3.6% for the whole year.

The latest data reflects the unevenness of Singapore’s manufacturing recovery, said DBS economist Chua Han Teng in a Business Times report. “While the worst of Singapore’s factory slump is already behind us, we expect the manufacturing recovery to be gradual and fragile in 2024.”

The report also quoted Barclays economist Brian Tan saying he expects Q4’s growth to be slashed to 2.4% yoy, while RHB acting chief economist Barnabas Gan expects a downgrade to 2.3% yoy. Gan also believes full-year growth will be revised down to “closer to 1 per cent”, from the flash estimate of 1.2%.

Maybank economists Chua Hak Bin and Brian Lee forecast that Q4’s growth will be revised down to around 2.5%. They also expect full-year growth in 2023 to be slashed to 1.1%.

Novo Tellus announced it is to dissolve

Novo Tellus Alpha Acquisition (NTAA) in January announced it will dissolve and not conclude a business combination after “careful consideration and thorough evaluation of potential targets”, and taking into consideration current market conditions.

The special purpose acquisition company (SPAC) said that it will announce details of the process to redeem its issued outstanding Class A shares in due course.

There will be no redemption rights with respect to founder shares, nor redemption rights or liquidation distributions that would come with the company’s warrants, including private placement warrants.

The dissolution followed news in December that another SPAC, Pegasus Asia, would also dissolve.

In November, the first SPAC to list here, Vertex Technology Acquisition Co or VTAC, merged with Taiwanese live-streaming app 17Live before listing in December. Shareholders were offered the right to redeem their shares at S$5.01 before 17Live commenced trading.

In January, 17Live fell S$0.24 or 15.5% to end the month at S$1.31. The lowest closing for the month was S$1.06 on 18 Jan.