Sentiment remained firm on recovery expectations

Date: April 5, 2021

  • Recovery hopes continued to underpin buying of stocks;
  • STI gained 0.7% at 3,181.68;
  • On Wall St, the S&P 500 ended the week above 4,000 for the first time;
  • US Treasury yields remained elevated, market had its worst quarter in 40 years;
  • SGX issued consultation paper on SPACs;
  • SPH announced strategic review;
  • Neo Group’s founder aims to take company private

A firm Wall St means a firm Singapore market

The Straits Times Index last week posted a 24 points, or 0.7% gain at 3,181.68 as it picked up where it left off at the end of March – riding a wave of optimism that the global economy is turning the corner as far as COVID-19 is concerned.

As always, much of this optimism originated in the US, where the S&P 500 on Thursday crossed the 4,000 mark for the first time as Wall Street built on a solid March following the rollout of President Joe Biden’s US$2 trillion infrastructure plan.

On the other hand, according to US newspaper Barron’s, the US Treasury bond market posted its worst quarterly performance in more than 40 years – for the three months ended March 31, the Treasury market lost 4.6%, according to ICE Indices. That is the worst performance since its 6.8% loss in the third quarter of 1980 reported Barron’s.

The benchmark 10-year Treasury yield, which reached 1.77% early last week, backed off on Thursday by about 6 basis points to 1.68%.

CNBC Markets quoted an analyst saying “the reopening of the U.S. economy continues to support equity markets as the light at the end of the coronavirus tunnel draws near’’ and that “fiscal and monetary policy support remain unprecedented and well-telegraphed at this juncture”.

Despite the positives, CNBC also quoted Bank of America equity strategist Savita Subramanian who said that the market may still need to digest the tax hikes included in the plan, creating a potential headwind for stocks.

“I think the market is pricing in the good news of infrastructure … I don’t think the market has necessarily priced in the negatives, which is how are we going to pay for this’’ she said.

SGX issued Consultation Paper on SPACs

On Wednesday the Singapore Exchange issued a Consultation Paper on Special Purpose Acquisition Companies or SPACs. These are shell companies that are listed before they have a core business. The money raised from their listing is kept in an escrow account until such time that a business is found and absorbed into the SPAC.

Because of the risks involved with inviting investors to buy blind into a company that may or may not end up with a viable business, SGX is proposing various safeguards. Among them is that the SPAC have a minimum market capitalisation of S$300m and minimum IPO price of S$10 with a time limit of three years to “de-SPAC’’ or find a business.

At least 90% of IPO proceeds will have to be placed in the escrow account and redemptions will only be allowed for shareholders who vote against any acquisition when proposed.

SPH to conduct strategic review

Media and property company Singapore Press Holdings, which last year reported a first-ever full-year loss and whose shares fell into penny territory below S$1, last week said it has appointed Credit Suisse to conduct a strategic review of its business.

The objective of the review is to “unlock and maximise long-term shareholder value”, the media and property group said after stock trading closed on Tuesday.

While the media business continues to face a challenging operating environment and outlook, the board of directors believes that the company remains undervalued, said SPH as it also announced its half-year results – a net profit of S$97.9m for the six months ended Feb 2021.

Overall revenue fell 4.2% to S$460m, dragged lower by the media segment. The company said the segment continued to be affected by the structural decline in print advertisements although digital circulation continued to grow.

Speculation of a review has been circulating for months, leading SPH’s shares to push well above the S$1 mark. They ended the week at S$1.67, up from the S$1.50 they sold for just before the announcement.

Neo Group’s founder bid to take company private at S$0.60 per share

Catering firm Neo Group’s founder Neo Kah Kiat, who is also chairman and chief executive officer, last week submitted a voluntary conditional cash offer to take the company private at S$0.60 a share.

Parties holding 82.26% of the Catalist company’s shares have given their irrevocable undertakings to accept the offer. The price is the highest in the two-and-a-half years prior to 29 March. An independent financial adviser will be appointed to advise the independent directors.