Rising US Treasury bond yields continued to take a toll

Date: October 30, 2023

  • The 10-year US Treasury yield crossed 5%, highest since 2007
  • The STI fell 0.5% to 3,061.85 as the S&P 500 entered correction territory
  • Despite strong US economy, 97% chance of no rate hike this week
  • Singapore’s factory output fell better-than-expected 2.1% in Sep
  • Top 5 most traded non-STI stocks averaged 11.5% return this year: SGX Research
  • UOB reported net profit of S$1.38b for its 3Q


As bond yields stayed elevated, the STI fell 0.5% whilst the S&P 500 entered correction territory

Rising US Treasury yields have become global markets’ main focus in recent weeks, and this was very much the case last week when the Straits Times Index fell 15 points or about 0.5% to 3,061.85.

On Monday, the 10-year yield crossed 5% for the first time since 2007, while the 30-year yield closed at 5.15%. Both yields had at that stage risen a full percentage point in two months – in early Aug, the 10-year yielded 4.07% whilst the 20-year yielded 4.16%.

Although the more closely-watched 10-year yield backed off to 4.8% on Tuesday, it rose to 4.952% on Wednesday, sending US stocks diving before pulling back to 4.84% on Thursday. On Friday, it closed at 4.855%.

The swings in bond prices and yields spilled over to stocks, resulting in the S&P 500 falling 0.5% on Friday, more 10% below a recent high of 4,588.96 which technically is defined as a correction.

Despite strong US economy, market expects Fed to stay put this week

Recent sales of newly-built homes rose 12.3% in September, compared to 0.7% forecast in a Wall Street Journal poll with economists. The data supported concerns that interest rates could remain high for a prolonged period.

The US economy expanded at a robust 4.9% annual rate from July through September as Americans defied higher prices, rising interest rates and widespread forecasts of a recession to spend at a brisk pace.

The Commerce Department said the economy expanded last quarter at the fastest pace in nearly two years — and more than twice the 2.1% annual rate of the previous quarter.

However, on Friday came news that the personal consumption expenditures (PCE) price index, which is the Federal Reserve’s preferred inflation gauge, rose 3.4 per cent from a year ago – the same rate as in the preceding two months.

As a result, the current probability that the Fed will not raise interest rates this week stands at 97%, according to the CME FedWatch Tool.

Singapore’s factory output fell better-than-expected 2.1% in Sep

Manufacturing output fell 2.1% year-on-year in September, easing from August’s 11.6% decline as electronics output climbed. The drop, which marked 12 straight months of declines, was smaller than the 4.5% contraction forecast by private-sector economists in a Bloomberg poll.

Excluding the typically volatile biomedical cluster, factory output climbed 0.1%, following the 12.7%  yoy fall in August.

The Business Times said economists were mixed on whether electronics manufacturing will continue to perform.

Though not to the same extent as the biomedicals cluster, electronics output has been volatile in Q3, said Barclays senior regional economist Brian Tan, cautioning against reading too much into its swings.

With the jump in September, we now see the production roughly back to the trend level again,” he was quoted saying.

OCBC chief economist Selena Ling also noted that the last positive electronics print in July was “very brief” and was immediately followed a contraction in August.

But she added: “The latest September reading could potentially herald the turning point for the domestic electronics industry even if the recovery path from here remains somewhat bumpy’’.

Top 5 most traded non-STI stocks averaged 11.5% return this year: SGX Research

In a Market Update on Friday, SGX Research said Singapore’s five most traded companies by turnover this year that are not a part of the STI are ComfortDelGro, UMS, AEM, Frencken and Golden Agri-Res, three of whom service the semiconductor sector.

“All five stocks booked positive total returns in the 2023 year to 26 Oct, ranging from a 0.6% gain for AEM to an 18.4% gain for Frencken. The average total return of the five stocks was 11.5%’’ said SGX Research.

“Each of the five stocks has booked net institutional inflow for the 2023 year to 26 Oct, ranging from S$8.9 million for Frencken to S$56.9 million for UMS. The five stocks booked S$197 million in combined net institutional inflow for the period, which represented 2.3% of their combined market value as of 26 Oct’’.

UOB reported net profit of S$1.38b for its 3Q

UOB reported net profit of S$1.38 billion for the third quarter ended September, down 1% the same period last year after accounting for one-off expenses related to the acquisition of Citigroup’s Malaysia, Thailand and Vietnam consumer banking business.

The bank said notwithstanding the one-off expenses, core net profit was S$1.5 billion or 5% higher, in line with Bloomberg consensus estimates.

Annualised earnings per share for the quarter stood at S$3.23, down from S$3.30 in the same period a year earlier.

Maybank said the bank’s healthy capital level provides buffer for 2H dividend expectations.

 “All in, a good set of numbers in line with our thesis of high earnings base, falling growth and resilient dividends. We maintain HOLD and our TP of S$30.86’’ said Maybank.

For the week, UOB fell S$0.58 or 2% to S$27.76.

Selected news and earnings in brief

17Live, a Taiwanese live-streaming platform that is the target of a business combination with Temasek-backed Vertex Technology Acquisition Company (VTAC) saw its losses widen to US$118.2m for its first half ended 30 June 2023 from a loss of US$42m last year. Revenue for the six months dropped 24.7% to US$151m, attributed to the normalisation and resumption of economic activities after the pandemic, as well as the platform’s shift to focus on profitability by targeting users over scale. However, VTAC highlighted that 17Live’s gross profit margin improved from 32.7% last year to 41.8% for this year’s first half. VTAC has proposed to buy 17Live for S$925.1m. If approved, it could bring the business value to S$1.2b.

Niks Professional, an aesthetic medical services provider, saw its shares close at S$0.20 on volume of 2.8m shares on its Catalist debut on Friday, 13% below its S$0.23 offer price. The offer of 21.8m new shares had been 5.9 times subscribed. The public received one million shares whilst 20.8m were placed out.

Wimar International’s net profit for the third quarter ended 30 Sep fell 59% to US$313.9m due to compressed refining margins from the tropical oils business and weaker performance from its fertiliser operations. This was partially offset by continued strong performance from its sugar milling and merchandising businesses and improved crushing margins arising from tightness in soybean availability in China. Revenue dropped 6.4% to US$17.7b.

Mapletree Logistics Trust reported a distribution per unit (DPU) of S$0.02268 for its second quarter ended 30 Sep 2023, a 0.9% increase from the same period last year. The amount distributable to unitholders rose 4.2% to S$112.5m mainly due to higher revenue from existing assets, along with a divestment gain of S$8.8m during the quarter. Gross revenue for the quarter rose 1.5% to S$186.7m whilst net property income (NPI) gained 1.2% to S$162m.

iFast Corporation reported a 308.4% rise in net profit to S$8.5 million for the three months ended Sep 30, 2023, from S$2.1 million a year ago. The increase in profitability was driven by contributions from the group’s non-banking operations, which comprise iFast’s core wealth management platform business and its ePension division. Net revenue – which excludes commission and fee expenses – from its non-banking operations in Hong Kong increased 113.2% to S$12.7 million in Q3. Including revenue from banking operations, which grew 42.1% to S$5.8 million, total revenue stood at S$66.2 million, up 23.8% from the previous year. The board has declared an interim dividend of S$0.013 per share, unchanged from the year before. The dividend will be paid on Nov 17.

Frasers Centrepoint Trust reported a 1.2% drop in DPU for its second half ended 30 Sep 2023 to S$0.0602 whilst distributions to unitholders fell 0.7% to S$103.1m. Gross revenue was up 1.8% to S$184.1m mainly due to an increase in gross rent attributable to a rise in portfolio occupancy, higher rental reversions and higher contributions from atrium leasing. For the full year, DPU was 0.6% lower at S$0.1215 while distributable income rose 0.2% to S$207.7m. Distributions will be paid on 29 Nov after books closure on 3 Nov.

Mapletree Industrial Trust (MIT) reported a DPU of S$0.0332 for the second quarter ended Sep 30, down 1.2% from last year because an an enlarged unit base. The amount distributable to unitholders in Q2 FY23/24 rose 3.5% to S$94.1 million, from S$90.9 million previously. It included compensation for the compulsory acquisition of land at 2 and 4 Loyang Lane, and net divestment gains from the sale of 65 Tech Park Crescent. Gross revenue for Q2 fell 0.8% to S$174.1 million whilst NPI for the quarter fell 1.4% to S$128.6 million. The distribution for Q2 will be paid on Dec 5.

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