The STI gained 2% to close above 3,100

Date: October 11, 2021

  • Wall St’s rebound helped the STI add 61 points at 3,112.81
  • US market’s strength came initially from fall in bond yields, US debt ceiling deal
  • Friday’s disappointing US jobs report led to dip in stocks and bonds
  • Fed tapering likely to start in Nov: senior Fed official
  • Singapore’s manufacturing growth slowed in Sep
  • SPH reported net profit of S$92.9m for FY2021

The STI managed to regain the 3,100 mark with a 2% gain

As far as the Straits Times Index was concerned, it was a volatile but ultimately firm week that just passed as traders and investors reacted to large swings on Wall St where trading was driven by rises and falls in US Treasury bond yields, government debt ceiling negotiations and economic reports, particularly jobs data.

As it turned out, a fall in the 10-year Treasury yield between Monday and Thursday from 1.55% to 1.53% and a deal struck on Thursday between Republicans and Democrats on the debt ceiling lifted the US market and by extension, local stocks.

The Straits Times Index on Thursday managed to close above the troublesome 3,100 level for the first time since 27 Sep and for the week, it recorded a gain of 61 points or about 2% at 3,112.81.

Average daily volume, however, was low at $1.2b and the index’s movements were driven largely by heavyweights, namely the three banks, Singtel, SIA and the Jardine group.

US stocks and bonds dipped on Friday after disappointing jobs report

On Friday, a disappointing US September jobs report put the brakes on Wall St’s rise when it was reported that the economy added only 194,000 jobs versus the 500,000 that the market had been expecting. However, the unemployment rate fell to 4.8%, the same level seen in late 2016 and better than the expectation for 5.1%.

Other than the stock market dipping slightly, the US bond market reacted by also selling – the 10-year US Treasury yield on Friday spiked upwards by 6 basis points to 1.6%, the highest since 4 June whilst the 30-year yield rose 2 basis points to 2.16%. Yields move inversely to prices.

Fed tapering likely to begin in November?

The 10-year yield has spiked from 1.31% since the end of September, when the Federal Reserve confirmed it will soon begin tapering, or reducing its monthly bond buying. That would drive less money into the bond market, lowering bond prices and lifting their yields.

According to US Federal Reserve vice-chairman William Dudley, the American central bank is almost certain to being tapering its bond purchases at its next Open Markets Committee meeting in early November, while interest rate rises are likely to come sooner and more aggressively than markets are anticipating.

These comments were made at a Bank of Singapore roundtable that was reported by The Business Times on Friday.

Mr Dudley was quoted saying unless something radical changes ahead of the Nov meeting, the Fed will likely shave as much as US$15b a month off its bond purchases. However, he said the Fed is definitely of the view that the inflation pressures seen today are not long-lasting – ie “transitory’’ – but it remains to be seen if this view is right.

September factory output expands more slowly

According to the Singapore Institute of Purchasing and Materials Management (SIPMM), Singapore’s headline Purchasing Managers’ Index (PMI) dipped to 50.8 in September from 50.9 in August as growth cooled in the non-electronics segment.

Although the data showed expansion in the manufacturing sector for the 15th consecutive month, the suggestion from analysts was that the momentum could have peaked, and a slowdown could be coming.

PMI readings above 50 indicate an expansion while figures below 50 represent a contraction.

SIPMM’s vice-president for industry engagement and development Sophia Poh was quoted in the press saying that “supply chain disruptions are still plaguing local manufacturers as they struggle to cope with reduced margins from higher cost pressures’’.

The Business Times on Tuesday reported that manufacturing PMIs remained contractionary in several Southeast Asian economies, with Vietnam’s reading stagnant at 40.2.

“Malaysia’s factory sector shrank at a slower pace, with the Sep PMI at 48.1 in Sep against 43.4 in August. Meanwhile, Thailand’s PMI stayed underwater despite picking up to 48.9 versus 48.3 in Aug’’ said BT.

SPH reported net profit of S$92.9m for 2021

Singapore Press Holdings (SPH) last week reported a S$92.9m for the financial year ended 31 Aug 2021 compared to a loss of S$83.7m last year. A final dividend of 3 cents per share was proposed which if approved would mean that the company will pay a total of 6 cents for the year compared to 2.5 cents for 2020.

Media operations were reported under discontinued operations following a recent move on 6 May to restructure SPH’s business by hiving off media into a separate unit.

In its press release, SPH said excluding Job Support Scheme (JSS) funding and including the effect of assumed depreciation for the media business post 6 May, media’s operating loss was flat at S$38.7 million in FY2021 compared to S$40.1 million in FY2020.

“With the impact of JSS factored in, but not that of assumed depreciation, media’s operating loss is S$13.0 million. Together with S$115.3 million of media restructuring costs, media’s loss is S$128.3 million in FY2021. An additional loss of approximately S$115.5 million will be recognised in FY2022 when the media restructuring completes in December 2021’’.

“This arises from the contribution of S$80 million cash, SPH REIT units and SPH ordinary shares for the maintenance of the Media business. Across FY2021 and FY2022, the media restructuring costs will be S$243.3 million including S$12.5 million of transaction costs’’.