STI slipped 0.4% despite Wall St’s continued rebound

Date: August 15, 2022

  • The STI regained 3,300 level on Thursday but lost it on Friday
  • The net loss for the week was 13 points or 0.4% at 3,269.27
  • Meanwhile, benign US inflation data helped Wall St to extend its rebound to four weeks
  • Singapore’s trade forecasts have been raised
  • Singapore’s 2Q GDP revised downwards but no recession expected
  • Survey found that businesses local expect tough 2nd half
  • US futures market pricing in 42.5% chance of 75-points rate hike in Sep, down from 68% earlier this month

STI regained 3,300 on Thursday but lost it on Friday

Wall Street’s continued rebound from bear market territory was the main factor behind the Straits Times Index regaining the 3,300 level on Thursday, a level that had been lost in early May.

Intense selling of Jardine Matheson Holdings (JMH) as well as the banks on Friday however, dragged the STI down 32.69 points to 3,269.27 for a net loss of 13 points or 0.4% for the week. JMH’s US$3.54 or 6.5% loss at US$51.20 on volume of 1.6m was largely instrumental in the STI’s steep loss on Friday.

Early in the week there was some caution in US trading after revenue warnings by semiconductor makers Nvidia and Micron. This in turn lead to weakness in the STI on Monday; however, prices staged a strong mid-week rebound after release of relatively benign inflation data that suggested the US Federal Reserve may not be so aggressive in its interest rate hikes in the coming months.

This led the STI close at 3,301 on Thursday, the highest close since 6 May when it lost 52 points to end at 3,291. Average daily volume improved to S$1.17b versus S$1.01b the week before.

Singapore’s trade forecasts have been raised

Singapore’s full-year trade forecasts have been raised after its export performance in the second quarter of 2022 came in better than expected due to higher oil prices and electronics.

Total merchandise trade is expected to grow by 15 to 16 per cent this year, up from the previous projection of 8 to 10 per cent, while non-oil domestic exports (NODX) is expected to grow by 5 to 6 per cent, up from the previous forecast of 3 to 5 per cent, Enterprise Singapore (ESG) said on Thursday.

“Higher oil prices and robust global semiconductor demand are likely to continue in 2022. These should support growth in oil trade in nominal terms and NODX respectively, and in turn total trade,” ESG said.

For the second quarter this year, NODX increased 9.1 per cent year on year, easing from the 11.4 per cent growth in the first quarter. The expansion was mainly due to the growth in shipments of non-electronics products, which rose by 8.9 per cent in the second quarter.

Exports for electronic products also expanded, by 9.7 per cent in the second quarter – its ninth straight month of growth, following the 12.3 per cent increase in the previous quarter.

Singapore’s Q2 GDP growth revised downward, no recession expected

The local economy’s updated performance for the second quarter was a 0.2% contraction quarter-on-quarter, but the Business Times reported that neither the authorities nor private sector economists expect a technical recession, which is defined as two consecutive quarters of contractions.

Ministry of Trade and Industry chief economist Yong Yik Wei was quoted saying growth is expected to return to “a slight positive’’ in the third and fourth quarters.

Singapore’s Q2 GDP growth was revised downwards to 4.4% year-on-year, slower than the earlier advance estimate of 4.8% but an improvement on the 3.8% growth recorded in Q1.

Survey finds that Singapore businesses less optimistic for 2nd half

The latest quarterly Business Times-Singapore University of Social Sciences (BT-SUSS) Business Climate Survey has found that Singapore firms are less optimistic about business prospects for the next 6 months.

Of 4 indicators monitored, business prospects took the largest hit for the second consecutive quarter. Though firms were still optimistic overall, the net balance tumbled 15 percentage points to 7 per cent, indicating that fewer firms were upbeat about the outlook for the next 6 months compared to last quarter’s survey.

The net balance is the difference between the share of firms reporting an increase and those reporting a decrease in an indicator.

The Business Times quoted Maybank’s senior economist Chua Hak Bin as saying “Manufacturing and trade-related services are losing steam and will likely slow significantly. There might even be some risk of a contraction in manufacturing during some of the months’’.

OCBC’s chief economist Selena Ling was quoted saying “Global recession fears have risen sharply, thus impacting business confidence and consumer sentiment. Major economies like the US are in a technical recession. Eurozone and the UK are at a high risk of recession given the ongoing energy crisis due to the Russia-Ukraine war and even China is at a risk of a sharper slowdown’’.

US consumer prices held steady, stocks continued to recover

After months of blistering monthly increases, consumer prices held steady between June and July as energy costs fell, providing relief to American households and suggesting the Federal Reserve’s quest to rein in inflation and cool the broader economy is having an impact.

The consumer-price index stayed flat in July from a month earlier and decelerated to an 8.5% annual pace, the Labor Department reported Wednesday, marking a sharper fall than had been expected from the previous month’s 9.1% pace. Economists had forecast a 0.2% rise in July over the month and 8.7% over the year.

Much of the fall in the pace of inflation in July was due to the drop in gasoline prices, which fell 7.7% over the month. Other categories saw significant declines as well, including airfares, used cars and trucks, and apparel.

Food prices, which can be volatile and have been affected this year by the Russia-Ukraine war, climbed 1.1% over the month and are now up 10.9% over the past year—the largest annual rise since May 1979. Even still, the so-called core CPI—which strips out food and energy sectors—still decelerated more than expected over the month and showed the smallest rise in four months.

Cooling inflation expectations have enabled the S&P 500 and Nasdaq to rise for four straight weeks, while the Dow has been up three of the past four weeks.

Earnings in brief

City Developments Ltd (CDL) on Thursday reported a record net profit of S$1.1b for the first half ended 30 June, versus a net loss of S$32.1m for the same period last year. This was mainly due to the divestment gains from sale of Millennium Hotel Seoul and Tagore 23 warehouse in Singapore, as well as a total gain of S$492m (inclusive of negative goodwill) from the deconsolidation of CDL Hospitality Trusts. Excluding these items, net profit would have been S$110.3m. A special interim dividend of S$0.12 has been proposed. CDL’s shares on Friday rose S$0.10 to S$8.34 on volume of 2.4m.

CapitaLand Investment Ltd (CLI) on Thursday reported a 38.3% drop in profit for the first half ended 20 June to S$433m due to “lower velocity in asset recycling activities’’ particularly in China. Earnings per share fell from S$0.25 to S$0.084 despite a 29.1% rise in revenue to S$1.35b. CLI’s shares on Thursday fell S$0.18 or 4.4% to S$3.92. They then lost S$0.05 at S$3.87 on Friday with 12m done.

Casino operator Genting Singapore on Friday reported a 4.3% drop in net profit for the six months ended 30 June to S$84.4m versus the same period last year and a 19.5% rise in revenue to S$663.1m. An interim dividend of S$0.01 has been proposed, to be paid on 30 Sep. Genting’s shares ended S$0.01 down at S$0.825 on turnover of 28.2m on Friday.

Probability of 50-points rate US hike in Sep now 57.5%

CME FedWatch indicates that 57.5% of investors are anticipating the Fed will boost rates by 50 basis points in September and 42.5% expect a 75-point hike. Earlier this month, investors predicted a 68% chance of a 75-point hike.