Date: June 10, 2024
- With the STI slipping 6 points or 0.18%, attention turned to second line
- Jardine Cycle & Carriage and Sats were second line index stocks in play
- Over in the US, a strong May jobs report on Friday raised interest rate concerns
- This week’s FOMC might provide some interest rate clues
- ECB cut interest rates for the first time since 2019
- Analysts raised SATS price targets after strong earnings
- Jasper in play, thanks to S$9m placement to investors, including Koh Boon Hwee
- Singapore’s PMI rose for 9th straight month in May
The STI fell 0.18% in quiet trading of blue chips
It was a relatively quiet week as far as trading in the Straits Times Index’s components was concerned with the index recording a drop of 6 points or 0.18% to 3,330.77. Average daily volume traded was S$1.22b versus the previous week’s S$1.74b which had been elevated by high volume on the final day of May.
This meant that traders turned their attention to the second line to expend their energies.
One stock in particular caught the eye – loss-making Jasper Investments, which surged six-fold over the week thanks to a cash injection from well-known corporate personalities.
Jardine Cycle & Carriage and Sats were second line index stocks in play
Within the index there was the usual trading of the banks and Singtel but two less prominent components were in focus – Sats, thanks to a strong earnings turnaround and Jardine Cycle & Carriage (JC&C) possibly because of its recent exclusion from the Morgan Stanley Capital International Index (MSCI) for Singapore.
After closing at S$28.02 on 14 May, the eve of the MSCI announcement, JC&C hit a low of S$25.74 on 31 May, a loss of S$2.28 or 8.1% in two weeks.
On Friday however, it closed at S$27.16, a rebound of S$1.42 or 5.5% in five days that came in relatively high volume of almost 2 million shares per day.
Over in the US, a strong May jobs report on Friday raised interest rate concerns
The US economy added a blockbuster 272,000 jobs last month and the unemployment rate rose to 4% from 3.9%, the Labor Department reported Friday.
That data far outpaced economists’ expectations for 180,000 jobs and an unemployment rate of 3.9%.
The Federal Reserve, in its battle to bring down inflation, is looking for a slow-but-steady cooldown in the labour market as the economy comes off the boil. However, Friday’s data showed the exact opposite, suggesting rate cuts might be delayed.
All three major US equity indices fell weakened on Friday, but not by much. All three also posted gains for the week with the S&P 500 edging +1.3% higher, the Dow Jones jumping +0.3%, and the Nasdaq Composite closing up +2.4%.
Chipmaker and AI favourite Nvidia fell slightly on Friday but ended the week up +10%, setting a new record high on Thursday after topping US$3 trillion in market value for the first time on Wednesday.
However the yield on the benchmark 10-year U.S. Treasury bond spiked from about 4.3% before the jobs numbers were released to around 4.42% shortly afterward and ended the day at about 4.43%.
This week’s FOMC might provide some interest rate clues
The Fed will meet this week to decide on its latest interest rates move. The futures market is pricing in an almost-100% chance that rates will be held steady next week; however, after Friday’s jobs report, the chance of a September rate cut fell from 70% on Thursday to roughly 50%.
All eyes will therefore be on the Fed’s statements after the meeting.
Analysts raised SATS price targets after strong earnings
Most analysts last week raised their price targets for airline ground handler and freight forwarder Sats after the company recently reported net profit for the year to March of $56.4 million, a turnaround from a loss of S$26.5 million a year earlier.
Revenue almost trebled to S$5.15 billion from S$1.76 billion and SATS declared a final dividend of 1.5 cents per share, compared with no dividend the previous year.
In a May 31 report, CGS International analysts Tay Wee Kuang and Lim Siew Khee set a $3.44 target for Sats, citing “surprising quarter-on-quarter growth in net profit of 4.1 per cent to $32.7 million” during the final quarter of FY2024.
They noted that Sats’ core business and WFS’ were operationally profitable, while contributions from associates and joint ventures were stronger. “We reiterate ‘add’ as we are confident of Sats improving profitability for FY2025,” they wrote.
Similarly, John Cheong of UOB Kay Hian noted that Sats’ FY2024 earnings beat his house expectations, with the resumption of dividend payments seen as symbolic of the company’s turnaround.
“The beat adds to our case that Sats’ earnings recovery will gain momentum in FY2025,” he wrote. Mr Cheong has a “buy” call on the stock with a price target of $3.22.
OCBC analyst Ada Lim raised her target from S$3.31 to S$3.39 and said the group’s top-line revenue growth would likely be driven by more commercial wins for its gateway services segment, along with further market penetration for its food solutions business given its increased production capacity.
Over the course of the week, Sats’ shares rose from S$2.78 to S$2.95, a gain of S$0.17 or 6.1%.
Jasper in play, thanks to S$9m placement to investors, including Koh Boon Hwee
Shares of watch-listed Jasper Investments, formerly known as Econ International, enjoyed hectic trading after the marine player secured S$9 million in capital from strategic investors, including Koh Boon Hwee, a board director of Singapore sovereign wealth fund GIC.
The mainboard-listed company, which invests in marine and shipping activities, said that it had secured S$9 million in capital via the placement of some 6.2 billion shares at S$0.0015 cents each tagged with 3.1 billion new free warrants. On Thursday, the stock closed at S$0.004 with more than 70m traded and continued to rise thereafter, finishing the week at S$0.006, or six times higher than its price at the start of the week.
The placement issue price of S$0.0015 per share represents a 50% premium to the volume weighted average price of S$0.001 per share on May 30, the full market day preceding the date the placement agreements were signed.
Black Kite, whose ultimate beneficial owner is GIC’s Koh, has subscribed to about 333.3 million placement shares and 166.7 million warrants for S$500,000. This brings the company’s shareholding in Jasper to 3% of its enlarged share capital.
Jasper has also secured about S$1.5 million from Azure Capital’s chief executive officer Terence Wong, as well as the funds he manages. Of this amount, about S$500,000 was invested by Wong personally.
Jasper has also secured a new chief executive – Dennis Goh, founder of restaurant listings site HungryGoWhere.com and former partner at venture capital firm Wavemaker Partners – who will put some of his own money into the company.
Jasper was placed on SGX’s watch list on Jun 6, 2023, as it had recorded pre-tax losses for three consecutive financial years.
It also had an average daily market capitalisation of less than S$40 million during the six months prior to that date.
Singapore’s PMI rose for 9th straight month in May
Manufacturing activity in Singapore expanded for the ninth consecutive month in May as it resumed a small, upward trajectory after stuttering somewhat in April amid weaker global growth.
The purchasing managers’ index (PMI), a barometer of the manufacturing sector, rose to 50.6 points in May, up from April’s 50.5 points. Meanwhile, the PMI for electronics, a key sector of manufacturing, rose to 51.1 points, up from 50.9 points in the month before.
Maybank economist Chua Hak Bin and UOB associate economist Jester Koh were quoted by the Straits Times saying that the manufacturing recovery remains intact, despite the recent weak readings for industrial production and exports, as well as the tepid electronics output in April.
OCBC Bank chief economist Selena Ling noted that the trajectory of the domestic PMI aligned with the expansion across the rest of the region, which included the positive readings in the China Caixin PMI, as well as in Indonesia, South Korea, the Philippines, Taiwan and Vietnam.
ECB cut interest rates for the first time since 2019
The European Central Bank on Thursday confirmed a widely anticipated reduction in interest rates at its meeting, despite lingering inflationary pressures in the 20-nation euro zone.
It takes the central bank’s key rate to 3.75%, down from a record 4% where it has been since September 2023.
Money markets had fully priced in the 25 basis point move lower at the June gathering. It is the first cut since September 2019, when the deposit facility was in negative territory.
Markets have only fully priced one further reduction this year, but economists polled by Reuters last week forecast two more cuts taking place over the period.
