Monthly Market Wrap: The STI: Range-bound between 3,150-3,280

Date: May 2, 2024

  • Wall St’s strength in the third week of the month despite adverse inflation data helped the STI gain 2.1% over the month at 3,292.69
  • STI laggards led the way: SGX Research
  • Overall, US stocks had an April to forget with US Treasury yields on the rise; investors watching to see if 10-year yield crosses 5%
  • Hot inflation data is causing yields to rise, expectations of US rate cut now in Sep
  • Singtel was in the news over the month because of Optus
  • Cordlife was in the news after it filed a police report, then proposed a share placement that was blocked


The STI held steady above 3,200 – but failed to challenge 3,300

From a technical perspective, the most remarkable feature of trading in April was that the Straits Times Index managed to hold steady above the 3,200 mark but failed to seriously challenge the 3,300 level.

Externally, the most notable feature was a dialling back in expectations over US interest rate cuts and the consequent uptick that this caused in US Treasury yields.

However, although Wall St stocks chalked up a forgettable April, their strength in the third week of the month meant the STI spent only five days below the 3,200 mark between 15-19 April, hitting an intra-month closing low of 3,144.76 on 16 April.

On the other hand, its intra-month closing high came on the last day of April when it closed Tuesday at 3,292.69. For the month, the index rose 68 points or 2.1%.

STI’s laggards led the way

Most of the STI’s gains came in the third week when the STI jumped 3.3%. According to SGX Research, the three sessions that spanned Apr 22, 23 & 24 saw the STI attract S$202 million in combined net institutional buying, up from S$140 million for the 3% STI total return that spanned Feb 14, 15 & 16.

“Compared to the snap rally in Feb, the April 22-24 rally saw considerably more of the preceding STI laggards lead the STI over the three sessions. As many as 8 of the 10 STI’s laggards in the 2024 year through to Apr 19 ranked among the 10 strongest STI performers over the three sessions of Apr 22, 23 & 24’’ said SGX Research.

“These 8 stocks included Seatrium, DFI Retail Group, Hongkong Land, CapitaLand Investment, Mapletree Pan Asia Commercial Trust, City Developments, Frasers Logistic & Commercial Trust and Mapletree Industrial Trust, with 7 of the 8 stocks trading at P/B ratios on average 30% below their respective 5-year P/B averages’’.

US stocks had an April to forget, registering steep falls ahead of 1 May’s FOMC

The Dow shed 1,991.45 points, or 5%, in April its worst decline since September 2022, according to Dow Jones Market Data. On Tuesday, the eve of the latest Federal Open Markets Committee meeting, Dow’s 1.5% drop on the day was its worst daily percent decline since March 22, 2023.

The S&P 500 fell 4.2% in April, which was its worst monthly decline since September 2023. It fell 1.6% on Tuesday, its worst daily decline since Jan. 31.

The Nasdaq Composite fell 4.4% on the month, also its worst monthly performance since September 2023. It fell 2% on Tuesday, its worst daily performance since Jan. 31, 2024.

US Treasury yields on the rise; investors watching the 10-year yield to see if it crosses 5%

The 10-year yield rose to roughly 4.7% twice in April and closed the month at 4.68%. The 2-year yield in the meantime, ended the month at 5.04%.

According to some observers, 5% is an important level for the 10-year yield that if breached, could spell trouble for stocks.

As of the end of April the S&P 500 traded at about 20 times forward price-earnings, which means the earnings yield that it offers, which is the inverse of the price-earnings ratio, is just 5% – barely, if any, additional return versus a bond.

Since equity holders want a higher rate of return as compensation for the added risk they’re taking, any meaningful move higher in the 10-year is thought would mean a selloff in equities.

In addition, a higher yield would raise the cost of borrowing—for consumers and businesses—making it more difficult for them to spend. The upshot of that: fairly slow economic growth, which could prompt analysts to reduce their earnings forecasts for companies.

Pushing yields higher: higher-than-expected US inflation

Driving US bond yields higher are two things: Hotter-than-expected inflation and the expectation that the Federal Reserve won’t cut short-term interest rates soon.

Early in the month, Fed chair Jerome Powell said, “Reducing rates too soon or too much could result in a reversal of the progress we have seen on inflation and ultimately require even tighter policy to get inflation back to 2%’’.

“But easing policy too late or too little could unduly weaken economic activity and employment’’.

A week later came news that the US consumer price index (CPI) climbed 3.5% year over year in March, faster than February’s 3.2% pace. Economists surveyed by FactSet had expected an annual increase of 3.4%.

A week later, Mr Powell said “the recent data have clearly not given us greater confidence, and instead indicate that it’s likely to take longer than expected to achieve that confidence’’ adding that “If higher inflation does persist, we can maintain the current level of restriction for as long as needed.”

The “higher for longer’’ forecast for US continued throughout the month, resulting in the futures market pushing back expectations of when rates might start to be lowered. Early in the month, the chance of a June cut was 56% but by the end of April, this had dropped to 11%.

According to the CME FedWatch Tool, the federal futures market now expects the first rate cut to be in September with a 44% probability of a 25-basis points reduction and a 12% chance the cut will be 50 basis points.

Singtel was in the news because of Optus

Early in the month the Australian press reported that talks between Singtel to sell a 20% stake in private equity firm Brookfield had fallen through. This followed speculation in March of a deal between Singtel and Brookefield which Singtel had denied.

On Monday this week Singtel announced it expects to recognise around S$3.1b in exceptional non-cash impairment provisions for the second half ended 31 March which will result in a net loss for its second half and therefore lower net profit for the full year.

However, the telco said it does not expect the provisions to affect its dividend payment and underlying net profit for the full year remains on track.

The recognition of impairment provisions comes as Optus, its wholly owned Australian subsidiary, expects to record A$540 million (S$481.6 million) in non-cash impairment provisions on its enterprise fixed assets.

The group foresees recording S$2 billion in non-cash impairment provisions on the goodwill of Optus, partly offset by a recently inked multi-operator core network (MOCN) agreement with TPG Telecom.

On Monday, Singtel’s shares closed S$0.06 or 2.5% down at S$2.35 on volume of almost 96m done. They ended the month at S$2.38.

Cordlife was in the news – filed police report and proposed share placement which was later blocked

Troubled cord blood storage firm was in the news throughout the month. First, it filed a police report against some of its former employees, following the preliminary findings of an internal investigation conducted by an external consultant.

The consultant “has uncovered preliminary evidence of potential wrongdoings involving mostly former employees of the group in connection with the Tank A incident”, said Cordlife, referring to one of the storage tanks that was exposed to temperatures above acceptable limits at different periods from November 2020.

The firm also announced a proposal to raise S$8.2 million by issuing a total of 51.2 million new ordinary shares at S$0.16 apiece via two separate subscription agreements with Charming Global Enterprises (CGE) and Darren Ng, a high-net-worth individual based in Singapore.

However, a week later a group of Cordlife’s directors filed an injunction application before the High Court of Singapore to restrain the company from issuing new shares.

Pending hearing this application, an interim injunction was granted by the High Court. The claimants comprise a controlling shareholder Nanjing Xinjiekou Department Store, as well as non-independent non-executive directors Zhai Lingyun and Chen Xiaoling.