Date: April 22, 2024
- The Straits Times Index lost the 3,200 mark for the fifth time this year
- Main reason was Wall St’s weakness where stocks and bonds fell
- Apart from Middle East tensions, Powell’s disappointing comments were also a factor
- Bond yields rose, with the 2-year yield almost at 5%
- Probability of June rate cut now down from 27% to 16%
- Cordlife filed police report against some former employees, proposed placement to raise S$8.2m
- Singapore’s key exports down 20.7% in March
- US tech heavyweights Tesla, Microsoft, Meta & Alphabet set to release earnings this week
Uncertainty of timing of US rate cuts shaved 40 points off STI
The Straits Times Index has flirted with the 3,200 level repeatedly this year, prompting many observers to describe the index as “range-bound’’ between 3,100-3,200.
Last week it lost a nett 40 points or 1.24% to 3,176.51, the fifth time since the start of the year that it lost its grip on the 3,200 mark. If it’s any consolation, volume picked up to an average daily figure of S$1.42b versus S$1.03b the previous week.
US Fed chair Powell spoke – and markets were disappointed
Most of the index’s losses came early in the week in the wake of weakness on Wall Street, where, apart from nervousness stemming from the problems in the Middle East, stocks came under pressure from disappointing earnings reports and comments by US Federal Reserve chair Jerome Powell that suggested interest rate cuts might be delayed.
“Last year, rebounding supply supported U.S. growth in spending and also employment, alongside a considerable decline in inflation,” Powell said on Tuesday afternoon.
“The more recent data show solid growth and continued strength in the labor market, but also a lack of further progress so far this year on returning to our 2% inflation goal.”
“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,” Powell said. “…If higher inflation does persist, we can maintain the current level of restriction for as long as needed.”
US Treasury yields rose sharply – and stocks fell
Not surprisingly, bond yields rose as their prices fell after Powell’s comments. The yield on the 2-year U.S. Treasury note increased by 0.1 percentage point to 4.99% having earlier in the week crossed 5%. The 10-year yield moved up to 4.62%.
As for stocks, the S&P 500 and Nasdaq Composite both fell throughout the week, recording losses of 3.54% at 4,967.23 and 6.11% at 15,282.01 respectively. The Dow Jones Industrial Average in the meantime, rose on Friday but still recorded a 0.23% loss for the week at 37,987.40.
Most of the losses came in tech stocks – on Friday, the largest falls in the S&P 500 were recorded by Super Micro Computer, Nvidia, Netflix, Jabil, Advanced Micro Devices, and Micron Technology, all stocks that are not in the Dow Jones Industrial Average.
Probability of June rate cut now down to 16%
According to the CME FedWatch Tool, the probability of a June rate cut which has been gradually falling over the past fortnight and stood at 27% at the start of the week, has now dropped to 16%.
The chance of a 25-basis points rate cut in July is now 36%, rising to 45% in September.
Cordlife filed police report against former employees, proposes private placement to raise S$8.2m
Cordlife Group announced that 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”, Cordlife said in a bourse filing on Wednesday.
Tank A refers to one of the storage tanks at Cordlife that were exposed to temperatures above acceptable limits at different periods from November 2020.
The cord blood storage company 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.
CGE is owned by Jiao Shuge, who co-founded Beijing-based private equity and venture capital firm CDH Investments.
Through respective private placements, CGE will subscribe for 44.5 million of the new shares for S$7.1 million, while Ng will purchase 6.7 million shares for S$1.1 million.
Both will collectively hold about 16.6% of Cordlife’s enlarged capital post the new share placement, which would result in the company’s share base increasing to 307,503,222 shares from 256,307,744 currently.
Over the course of the week, Cordlife’s shares lost $0.023 or 15.8% at S$0.123.
Singapore’s key exports down 20.7% in March
Singapore’s key exports shrank 20.7% year on year in March, dragged down by declines in the non-electronics sector, a steeper contraction from February’s 0.2% fall, and was worse than the 7.4% contraction that private-sector economists polled by Bloomberg were expecting. Both electronics and non-electronics exports recorded declines.
But despite the surprise plunge in March, the Business Times (BT) reported that private-sector economists still expect NODX – in particular electronics – to continue recovering for the rest of 2024.
For one, the latest Purchasing Managers’ Index data suggested that Singapore’s overseas shipments should see better prospects this year than the last, said DBS economist Chua Han Teng in the BT report.
While electronics NODX recorded a setback, “the ongoing turnaround remains encouraging”, he noted. “We expect Singapore’s electronics shipments to benefit from the gradual improvements in global semiconductor sales as demand and inventory normalises after 2023’s significant digestion.”
Maybank’s Dr Chua and Lee maintained their full-year NODX forecast of between 7 and 9 per cent growth, a tad higher than the official forecast of 4 to 6 per cent.
The week ahead – US tech heavyweights to announce 1Q earnings
Next week’s US earnings reports from some of the market’s biggest technology and growth companies could prove an important test for the US stock rally, which has flagged in recent weeks as expectations for interest cuts fade.
Tesla, Meta Platforms, Alphabet and Microsoft – all set to report next week – are part of the group of companies that had been dubbed the Magnificent Seven as they led the S&P 500 to a 24% gain last year.
In Singapore, several REITs will release their latest figures, including Mapletree Pan Asia Commercial Trust on Tuesday, Frasers Centrepoint Trust and OUE Commercial Trust on Wednesday and Mapletree Industrial Trust on Thursday.
Investing with Insight: Watch this Week’s Technical Outlook
