The Straits Times Index shot past 3,800 – but then lost it on Friday

Date: December 9, 2024

• The STI gained 57 points or 1.5% for the week at 3,796.16
• It has earlier closed above 3,800 at 3,822, not far to go to challenge 3,907 all-time high
• US November jobs report showed a strong jobs market
• Probability of a 25-points cut in Dec up from 67% to 85%
• S&P 500 at a new high, Bitcoin above US$100,000
• SingPost to sell Aussie business for A$1b; S&P placed SingPost on CreditWatch Negative
• Gordon Tang and wife make conditional offer of S$1.16 each to buy all units of Suntec REIT after 30% threshold was crossed
• Suntec REIT unitholders should reject the offer: RHB
• Institutions were net buyers of S’pore stocks at end-Nov; DBS bought back S$15m of shares

 

Banks helped push the STI above 3,800 – 3,900 next?

The banks and a handful of other blue chips last week powered the Straits Times Index above 3,800 and within sight of its 2007 all-time high of 3,907 but the rally faded on Friday when the index dropped 26.52 points to 3,796.16, possibly in line with weakness on the Dow futures that came ahead of the release of the US’s November jobs report.

On Thursday the STI touched an intraday high of 3,842 before pulling back to finish at 3,822, the first time in more than 17 years that it managed to close above the 3,800 mark.

As it turned out, despite Friday’s fall there were grounds for optimism as the index still managed to record a useful net gain of 57 points or 1.5% for the week. Average daily volume was S$1.22b, in line with recent weeks.

US November’s jobs report points to a 25-bp rate cut this month

Payrolls increased by 227,000 in November, surpassing economists’ expectations of 200,000, whilst October and September hiring was revised higher. Unemployment rate was 4.2% up from 4.1% in October.

Most observers felt that the report pointed to the US Federal Reserve cutting interest rates again in December following its 50-basis points reduction in September.

In the futures market, the probability of a 25-basis points rate cut in December rose to 85% from 67% a week earlier. The probability that there will be no cut is currently 15%.

How Wall St fared – S&P 500 at a new high, Bitcoin above US$100,000

Wall Street posted a three-week win streak on Friday, propelled by strengthened expectations for another interest rate cut by the Federal Reserve at its final monetary policy committee meeting of the year later this month.

The week also marked two big milestones: the S&P 500 surged past 6,100 points in a historic first, and the benchmark index has now smashed past the year-end targets of most of the brokerages on the Street. Meanwhile, Bitcoin finally surpassed the US$100K level after languishing below that milestone for nearly a month.

For the week, the S&P 500 climbed 1.0%, while the Nasdaq Composite Index added 3.3% whilst the Dow Jones Industrial Average slipped 0.6%.

SingPost to sell Aussie business for A$1b; S&P placed SingPost on CreditWatch Negative

Singapore Post (SingPost) last week said it has struck a deal to sell its Australian business at an enterprise value of A$1 billion (S$870 million) as part of the outcome of a strategic review. The review, launched earlier this year, sought to explore strategic options that would enhance business value and maximise shareholder value, it said.

SingPost will receive actual cash proceeds of A$775.9 million and generate a gain on disposal of about S$312.1 million, subject to adjustments determined at the time the deal is completed. The buyer is Pacific Equity Partners, an Australia-headquartered private equity fund, said the national postal service firm.

However, ratings agency S&P responded by placing SingPost on CreditWatch negative, saying the sale will be “transformative” for SingPost and clouds SingPost’s future strategy.

“Over the past four years, SingPost has invested into the logistics industry in Australia to mitigate the structural decline in the postal sector,” said S&P. SingPost’s Australian business is now a key contributor, accounting for 58 per cent of total revenue in the first half of FY2025.

The segment includes fourth-party logistics services, third-party logistics solutions such as transportation and distribution, and last mile courier delivery, as well as warehousing services.

The loss of a key earnings pillar introduces uncertainty over SingPost’s future strategy and earnings contribution, said S&P.

For the week, SingPost’s shares slipped S$0.005 to S$0.575.

Gordon Tang and wife make conditional offer of S$1.16 each to buy all units of Suntec REIT after 30% threshold was crossed

Property tycoon Gordon Tang and his wife Celine have made a mandatory conditional cash offer to acquire all the units of Suntec REIT at S$1.16 per unit in cash.

The offer was made through their investment holding company Aelios, which was formed to make the offer, which was triggered after Aelios bought 62.5 million units, about 2.1% of the REIT’s total units, from the market at S$1.16 each.

This brought its total deemed interest in the trust to 31.5%, amounting to 918.7 million units.

Aelios said that the offer was made solely to comply with Rule 14.1 of the Take-over Code, by which any entity controlling more than 30% of a REIT must make a mandatory general offer to acquire its remaining units. The offer will turn unconditional once Aelios’s stake crosses at least 50%.

The company added that it intends to maintain the REIT’s listing status following completion of the offer.

Suntec REIT unitholders should reject the Gordon Tang offer: RHB

RHB on Friday said Suntec REIT unitholders should reject the S$1.16 offer as it “severely undervalues the REIT, as it reflects a 44 per cent discount to its net asset value (per unit) of S$2.07”. It is also below the research house’s target price of S$1.35 on the counter.

RHB said that the offer price will set a unit price floor at current levels. It is also optimistic that the REIT will benefit from further rate cuts in 2025, due to its “high gearing and low fixed hedge position”.

The research house maintained its “buy” call and its target price on the counter.

As at Sep 30, Suntec REIT had an aggregate leverage ratio of 42.3%. Its weighted average debt to maturity was 3.07 years, and total fixed interest rate borrowings stood at about 61% as at end-September.

Institutions were net buyers of S’pore stocks at end-Nov; DBS bought back S$15m of shares

SGX Research last week reported that over the five trading sessions from Nov 22 to 28, institutions were net buyers of Singapore stocks, resulting in a net institutional inflow of S$188 million, reversing the net outflow of S$38 million observed over the five preceding sessions up to Nov 21.

Stocks that led the net inflows were Yangzijiang Shipbuilding, OCBC, Keppel, CapitaLand Integrated Commercial Trust, SGX, UOB, Seatrium, Jardine Matheson, Eneco Energy and Thai Beverage.

Leading the institutional outflows were Singtel, Frasers Logistics & Commercial Trust, CapitaLand Investment, SIA, AEM Holdings, Hongkong Land, Frasers Centrepoint Trust, Sembcorp Industries, Keppel REIT and ESR-Logos REIT.

From a sector perspective, the five sessions saw industrials and financial services book the most net institutional inflow, while telecommunications and REITs booked the most net institutional outflow.

The five sessions also saw 22 primary-listed companies conduct buybacks for a total consideration of S$44.8 million, up from the S$27.6 million in the preceding five sessions.

On Nov 28 DBS bought back 350,000 shares at an average price of S$42.04 per share for a total consideration of S$14.7 million. This represented 0.01 per cent of its issued shares (excluding treasury shares).

Investing with Insight: Watch this Week’s Technical Outlook

---