STI narrowly avoided losing 3,100, closed with 0.4% gain at 3,147.09

Date: March 11, 2024

• After threatening to fall below 3,100, the STI rebounded
• US stocks came under pressure after Fed chief’s testimony, strong jobs report
• Probability of US rate cut this month only 3%
• Tech sector leader Nvidia’s shares drop 6% on Friday
• SIAS urged Great Eastern to consider requests by minorities
• SIA’s 3Q operating profit down 19.3% to S$609m
• Citi Research downgraded SIA from “buy’’ to “neutral’’
• Banks to pay S$11.5b in dividends, average dividend yield 6%: SGX Research
• Singapore’s 1Q GDP upgraded – partly thanks to Taylor Swift
• SGX RegCo seeks feedback on incorporating international sustainability standards into Listing Rules

 

The STI managed to distance itself from 3,100 after earlier threatening to fall below

On Monday and Tuesday, selling pressure meant that the Straits Times Index looked in danger of falling below the 3,100 mark when it closed at 3,107 – just little over a week after it had dropped below 3,200.

However, a 29-points bounce  on Wednesday that was led mainly by the banks and Singapore Airlines helped eased some of those concerns, and this was followed by relative firmness for the rest of the week.

The nett outcome was a 12-points or 0.4% rise for the STI at 3,147.09 which came with average daily volume of S$1.04b

Trading volume reached its peak for the week on Wednesday, when S$1.24b was done. Of this, S$465m came from trading of the three banks and SIA, roughly 38% of the entire day’s business.

Wall St wobbled ahead of Powell’s testimony and closed lower for the week

Over on Wall Street, all three major indices fell sharply on Tuesday, with the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite losing 1.04%, 1.02%d and 1.65% respectively reportedly ahead of testimony by US Federal Reserve chief Jerome Powell to lawmakers.

Federal Reserve Chair Jerome Powell said Wednesday that the central bank’s policy-setting committee still isn’t convinced that continued progress toward their 2% percent inflation objective is “assured,” and that it won’t make sense to cut interest rates until it is confident.

“The Committee does not expect that it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent,” Powell said in a statement prepared for delivery to the House Committee on Financial Services.

Powell assured lawmakers that cuts are still on the agenda, even with the recent uptick in inflation. His testimony, however, provided no additional details on timing—or what conditions need to be met to reassure central bank policymakers that the downward inflation trend will hold.

On Friday, the release of a solid February US jobs report cut short a rebound and ensured that for the week, all three major indices recorded losses.

In the futures market, the probability of a rate cut later this month was only 3%.

US tech stocks closed lower, Nvidia on Friday registered worst day in 15 months

Shares of semiconductor firm Nvidia which have led the tech rally over the past year, on Friday closed down 6.2% at US$869.12–the largest percentage decline since Dec. 27, 2022, when it fell 7.1%. Nvidia had risen for six straight days. Still, it is up 75.5% this year and 278% from 12 months ago.

The S&P 500 technology sector was down 1.5%. The iShares Semiconductor ETF was down 3.9%.

SIAS urged Great Eastern to consider requests by minorities

The Securities Investors Association (Singapore) or SIAS last week urged the board of Great Eastern to “seriously and objectively” consider the true purpose of requests made by a group of minority shareholders, instead of trying to avoid addressing them via legal technicalities.

The statement on Thursday was in response to the insurer’s dismissal of minority shareholders’ request to table three proposed resolutions at its upcoming annual general meeting (AGM).

Great Eastern’s board said on Wednesday that it has sought legal advice and understands that the request “does not satisfy all of the requirements” for a requisition to be moved at the AGM.

Led by a former remisier named Ong Chin Woo, the minority investor group put forward three resolutions to address the undervaluation of Great Eastern’s shares: to withhold directors’ fees, to replace OCBC shares in the share option schemes of executives with Great Eastern shares, and to appoint an independent financial adviser to explore options to enhance shareholders’ value.

“It is however surprising that Great Eastern has adopted a somewhat legalistic response to the tabling of resolutions by minority shareholders, a move which appears to sidestep the substantive concerns raised by the minority shareholders,” said SIAS.

“We believe it would be premature for the company to dismiss the tabling of these resolutions outright, especially based on a legal technicality’’.

“Instead, we encourage the board to exercise its discretion based on the spirit of the law to include these resolutions on the agenda for the upcoming AGM,” said SIAS.

SIA’s 3Q operating profit down 19.3% to S$609m

Singapore Airlines (SIA) n Tuesday reported a 4.9% increase in net profit of S$659 million for the third quarter ended Dec 31, 2023 driven by robust passenger demand, led by a rebound in North Asian markets as China, Hong Kong, Japan and Taiwan reopened.

Revenue for the third quarter also increased by 4.9%, to S$5.1b, surpassing the S$5 billion mark in quarterly revenue for the first time in SIA’s history.

The group’s operating profit, however, fell 19.3% to S$609 million due to total expenditure increasing by 9.3% to S$4.5 billion, as non-fuel expenditure and net fuel cost both rose.

For the nine months ended Dec 31, 2023, the group’s net profit rose 35% to a record S$2.1 billion. Revenue for nine-month FY2024 rose 7.4% to S$14.2.

Citi Research downgraded SIA from “buy’’ to “neutral’’

Citi Research is expecting SIA’s share price to remain under pressure heading into the final quarter of its financial year. It noted that the national flag carrier’s unit costs, excluding fuel, are “on the way up” in line with management guidance.

In a report on Wednesday (Mar 6), the research house downgraded its call on the stock to “neutral” from “buy” while slashing its target price to S$6.63 from S$7.72.

Citing the management’s “underwhelming” guidance on unit costs excluding fuel and “disappointing” cargo pricing, the research house cut SIA’s FY2024 to FY2026 core earnings estimates as well as revenue forecasts to account for softer cargo pricing assumptions.

The lower target price stood at a lower 1.25 times price-to-book value multiple based on Citi’s FY2025 estimates, against the research house’s 10 per cent core return-on-equity (ROE) estimate.

SIA’s shares enjoyed a large push two weeks ago that took the price to a near-term high of S$7.30. However, they started last week at S$6.46 and ended Friday at S$6.38 for a nett loss on the week of S$0.08 or 1.2%.

Banks to pay S$11.5b in dividends, average dividend yield 6%: SGX Research

Singapore Exchange’s (SGX’s) Research in a 29 Feb Market Update said the banks have proposed to pay final dividends (subject to shareholder approval) that take the total combined dividend amounts for the trio to S$11.5 billion, for their full 2023 Financial Year (FY23) and that based on end of FY23 share prices, this generated a 6% average dividend yield for the trio.

“While the trio are STI heavyweights, they also maintain a combined 15% weightage in the FTSE ASEAN Index. This combined weightage notches up to 18% for the FTSE ASEAN Target Dividend Index, which is designed to achieve 100% dividend yield increase compared to the FTSE ASEAN Index’’ noted SGX Research.

Nio’s Q4 loss narrowed as sales margin improved

China-based electric vehicle (EV) maker Nio narrowed its fourth-quarter loss for FY2023 by 4.3% year on year to 5.6 billion yuan (S$1.1 billion) on a higher vehicle sales margin.

The company, which is listed in the United States, Hong Kong and Singapore, delivered a 4.6% year-on-year rise in vehicle sales to 15.4 billion yuan for the period to December 2023, with vehicle sales margin improving to 11.9% from 6.8% for the year-ago quarter.

The higher vehicle sales margin was mainly attributed to lower material cost per unit and the absence of inventory provisions and losses on purchase commitments that were recorded in Q4 FY2022.

However, for FY2023, the EV maker’s net loss widened to 21.1 billion yuan from 14.6 billion yuan in FY2022, despite its top line having risen by 12.9% year on year to 55.6 billion yuan.

Singapore’s 1Q GDP upgraded – partly thanks to Taylor Swift

Economists upgraded the first-quarter growth forecast for Singapore’s economy, with some attributing the gains in part to Taylor Swift’s Eras tour concerts.

Gross domestic product (GDP) will probably expand 2.9% in the three months ending Mar 31, the quickest pace in six quarters, according to the median estimate in a Bloomberg survey.

They also raised the annual growth expectation to 2.5% from 2.3% toward the upper end of the government’s 1-3% forecast for 2024.

The Singapore leg of the Eras tour involves the singer performing six concerts through Mar 9. That carries benefits to Singapore’s hospitality, food & beverage, and retail activities, according to DBS economist Han Teng Chua.

“These would be mainly supported by higher foreign tourist spending, with a large number of overseas fans attending the Singapore concerts,” said Chua, who estimates the shows to add around S$300 million – S$400 million, or 0.2 percentage points of GDP, to the city-state’s economy in the first quarter.

SGX RegCo seeks feedback on incorporating international sustainability standards into Listing Rules

The Singapore Exchange Regulation (SGX RegCo) is seeking feedback from the market on how to incorporate standards developed by the International Sustainability Standards Board (ISSB), a global accounting standards body, into its reporting rules on climate-related disclosures for listed companies.

The regulator is also proposing to make it mandatory for companies to report the primary components of a sustainability report, such as their sustainability reporting framework and targets.

The consultation, which opened on Thursday (Mar 7), comes after the authorities announced previously that listed companies in Singapore would be required to make climate-related disclosures according to standards by the ISSB from FY2025.

Investing with Insight: Watch this Week’s Technical Outlook

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