The rebound continued

Date: April 10, 2023

  • Markets appear to have put banking worries behind them
  • Upward momentum of previous week continued, STI gained 1.3%
  • Sembcorp Marine in line for STI inclusion: BT report
  • Singapore market is a safe harbour: CGS-CIMB
  • Genting Singapore upgraded to “buy’’: Maybank
  • Boustead Projects applied for 3-month extension to restore free float
  • Parkson Retail Asia’s going concern status is a significant doubt
  • US March jobs data suggests another 25-basis points rate hike in May
  • This week’s US data: Consumer price index on Wed, wholesale inflation on Thursday


Markets appear to have put banking worries behind them, STI up 1.3%

The rebound momentum of the previous week continued into last week, enabling the Straits Times Index to add a net 42 points or 1.3% at 3,300.48. Markets everywhere appeared to have put banking worries behind them, which meant that last week’s focus as far as Wall St was concerned was the state of the economy and the direction of interest rates.

However, it’s worth noting that in the banking sector, JPMorgan Chase CEO Jamie Dimon last week said “the current crisis is not yet over.”

“And even when it is behind us, there will be repercussions from it for years to come,” Dimon wrote in his annual letter to shareholders on Tuesday.

Average volume here during a holiday-shortened week was S$1.19b, the same as the week before. The trio of local banks posted a mixed performance – DBS gained S$0.38 or 1.15% over the week at S$33.38, OCBC was unchanged at S$12.37 and UOB added S$0.06 or 0.2% at S$29.82.

Sembcorp Marine could be included in the STI

On Friday, the Business Times reported that Sembcorp Marine’s market cap is now around S$8.2b, which makes it the largest stock on the STI’s reserve list and therefore eligible for inclusion as a component of the STI when the index is next reviewed in September.

If Sembmarine is to be added, the smallest index stock at the time would face removal. As of 6 April, this was Keppel DC Reit with a market cap of S$3.6b. It was the index’s worst performer in 2022, losing 28.3%. However, for 2023 it has rebounded 17.5%.

Singapore market is a safe harbour: CGS CIMB

On Thursday, CGS-CIMB said in a strategy report that the Singapore market remains a safe harbour and forecast earnings growth of 15.8% and 4.3% for calendar years 2023 and 2024 respectively, supported by a projected 2023 dividend yield of 5.2%, the highest level in the last decade.

Genting Singapore upgraded to “buy’’: Maybank

In a 20 March report, Maybank said evidence is growing that the mass market will exceed pre-Covid levels comfortably, in our view. “Singapore’s booming property prices created a lot of wealth which we gather has been driving locally sourced mass market gross gaming revenues (GGR) higher. Also, seat capacity from China to Singapore suggests that Chinese visitors could recover to pre-Covid levels by year-end’’.

The broker has lifted its earnings estimates by 18%-20% and its discounted cash flow target price to S$ 23%. Last week, Genting rose S$0.06 or 5.4% to S$1.18.

Boustead Projects applies for 3-month extension to restore free float

Boustead Projects last week applied to Singapore Exchange Regulation (SGX RegCo) for a 3-month extension to restore its free float, starting from 27 March, which was the day that Boustead Singapore’s voluntary unconditional cash offer for Boustead Projects closed.

Engineering services provider Boustead Singapore had garnered 95.5% in shareholding interest at the close of the takeover offer. Under SGX’s listing rules, at least 10% has to be in public hands. If not, trading may be suspended and companies given 3 months to restore their free float, failing which the company could be delisted.

SGX RegCo last month said Boustead Projects is obliged to restore its free float and if it is directed to delist, it has to provide an exit offer that is deemed both fair and reasonable by an independent financial adviser (IFA).

In this case, the IFA PrimePartners had already stated that the offer of S$0.95 per share is “not fair but reasonable’’ whilst the Securities Investors Association (Singapore) advised shareholders not to accept it.

Parkson Retail Asia faces “significant doubt’’ as a going concern

Independent auditor Foo Kon Tan last week again raised Parkson Retail Asia’s ability to operate as a going concern. It noted that the department store retailer’s current liabilities as at 31 Dec 2022 exceeded its current assets by S$19.8m.

Together with its subsidiaries, the group’s current liabilities exceed its current assets by S$59.3m. “Notwithstanding that the group reported net profit from continuing operations before tax of S$44.1m for the year ended 31 Dec 2-22…these events or conditions indicate the existence of a material uncertainty that may cast significant doubt about the group’s ability to continue as a going concern’’ said the auditor.

The company’s Board noted that the independent auditor’s report for the previous 18-month financial period ended Dec 2021 contained a similar emphasis of matter.

On Wall St, attention has shifted from banks to state of the economy

The US Bureau of Labor Statistics reported early last week that February job openings clocked in at 9.93 million, lower than the 10.56 million disclosed in January and falling below the 10.4 million that economists expected, according to FactSet.

The Bureau then reported Friday that nonfarm payrolls increased by 236,000 last month, essentially splitting the difference between various surveys of economists that showed estimates of 230,000 or 240,000, depending upon who was canvassing the forecasters.

Although robust by historic standards, the payroll rise was the smallest of the post-pandemic economic recovery.

Most important to investors, the jobs numbers suggest the Fed will raise interest rates one more time in this cycle, at the Federal Open Market Committee’s meeting in early May.

According to the federal funds futures market, the probability that this will be 25 basis points is now 67%, with a 33% chance that rates will remain unchanged.

US data to watch out for next week

Data from the consumer-price index for March is scheduled to be released on Wednesday, and investors will see a report on wholesale inflation on Thursday. The probabilities cited earlier could change, depending on whether the data shows higher-than-expected inflation.

Investing with Insight: Watch this Week’s Technical Outlook