Wall St’s record-breaking run continued to have muted impact here

Date: December 26, 2023

  • The STI gained 24 points or 0.8% at 3,140.32
  • It was a muted performance, given that the US market rose for 8th consecutive week
  • 10-year US Treasury yield now down to 3.89%
  • Market now pricing in 14.5% chance of a rate cut in January
  • SPAC Pegasus Asia to dissolve because of adverse market conditions
  • Singapore’s NODX rose in Nov after 13 months of contractions
  • Exit offer of S$0.60 for Amara Holdings deemed “fair and reasonable’’
  • Elite Commercial Reit launched fully underwritten preferential offering at £0.27 apiece


US market’s strength did not have much impact here

Although Wall Street’s stocks and bonds continued their advances last week on expectations of interest rate cuts next year, the impact here was relatively muted, with the Straits Times Index trading within a narrow band in relatively low volume before ending the week at 3,140.32, for a nett gain of 24 points or about 0.8%. Average daily volume was an unimpressive S$842m versus S$1.23b the previous week.

Among the reasons offered by observers for the STI’s decoupling from events overseas was that the index is heavily weighted in favour of the banks, the outlook for whom is not expected to be great, given that interest rates are expected to trend lower next year.

Also a reason was the STI’s heavy weightage in the Jardine group – particularly Jardine Matheson, DFI Retail Group and Hongkong Land – with its exposure to a slowing China and Hong Kong.

Over on Wall Street…

Wall Street extended its astonishing bull run to eight straight weeks. Sentiment this week has been boosted by favourable economic data, capped by the Federal Reserve’s favourite inflation gauge coming in less than expected.

The November core personal consumption expenditures price index rose by just 0.1% from October and was up 3.2% from a year ago. Those marks are low enough to support the narrative that inflation is in a downward trajectory and the Federal Reserve will lower benchmark interest rates in 2024.

For the week, the Dow rose 0.22%, the S&P gained 0.75%, and the Nasdaq climbed 1.21%.

The 10-year Treasury yield, which in early October stood just over 5%, continued its slide and ended the week at 3.89%.

On the CME’s FedWatch tool, most bets are on a January hold, but odds of a 25-basis point cut are now at 14.5%, up from 4% a week earlier.

SPAC Pegasus Asia to dissolve because of adverse market conditions

Special purpose acquisition company (SPAC) Pegasus Asia announced that will cease operations and wind up its business because of adverse market conditions.

It will tell shareholders at a later date how they can redeem their stock. There will be no redemption rights or liquidating distributions regarding its warrants.

Pegasus, which raised gross proceeds of $170 million in its January 2022 IPO, is sponsored by European asset manager Tikehau Capital and Financiere Agache, a luxury goods company backed by LVMH chief executive Bernard Arnault’s family office.

SPACs are designed to acquire another company and raise money through an initial public offering (IPO) within two years of their own IPO, a process known as a de-SPAC transaction.

If the SPAC cannot find a suitable acquisition target, it must dissolve and return the funds to investors, a fate that has befallen Pegasus.

Vertex Technology Acquisition Corporation (VTAC), a SPAC backed by Vertex Venture Holdings and a subsidiary of Singapore’s investment company Temasek, merged with live-streaming platform 17Live on Dec 8.

VTAC shareholders redeemed about 62.53 per cent of the Spac’s share capital after several analysts concluded ahead of the merger that its shares were overvalued.

17Live shares have plunged following the business combination, closing at $1.55 on Wed, down 65.78% from VTAC’s IPO price of $5. They rebounded to S$1.80 on Thursday but finished the week at S$1.74 for a nett gain of S$0.05 or about 3% for the week.

The third and remaining SGX-listed Spac, Novo Tellus Alpha Acquisition (NTAA), has until January 2024 to announce a potential business combination.

A Singapore Exchange (SGX) spokesman said that “the SPAC framework is here to stay in the long term and complements the traditional IPO route”.

“The framework was launched to offer listing aspirants greater certainty on price and execution. New structures and products such as SPAC offer wider choices to both issuers and investors’’.

Singapore’s NODX rose in Nov after 13 months of contractions

Non-oil domestic exports (NODX) rose by 1% year on year (yoy) in November, improving from the upwardly revised 3.5 per cent contraction in the previous month.

It was the first expansion after 13 straight months of contraction but was just short of private-sector economists’ expectations of a 1.5% yoy growth.

Favourable base effects likely played a role in improving NODX for the first time this year, said economists, and any recovery ahead is likely to be fragile.

“The question now is whether this represents a temporary or extended pause in the external sector’s recent better trend. We suspect it will be the latter,” said Alex Holmes, lead Asia economist at Oxford Economics was quoted by the Business Times as saying.

“Exporters will struggle for momentum over the coming quarters,” he added.

Exports of non-electronic products grew 5.2% yoy, improving from the 2.9% decrease in October. Pharmaceutical exports surged%, while non-monetary gold shipments jumped 106.5%.

Electronics exports shrank 12.7% yoy in November, deepening from the 5.6% decline in the previous month. This was attributed mainly to the fall in shipments of integrated circuits, PCs and diodes, said EnterrpiseSG.

OCBC chief economist Selena Ling said a turnaround in global electronics demand is still being anticipated for 2024.

“Generative AI (artificial intelligence) may provide some tailwinds into next year, but a recovery in PC and 5G smartphone demand will be pivotal to bolster the industry outlook after an extended down cycle,” she said.

Exit offer of S$0.60 for Amara Holdings deemed “fair and reasonable’’

Xandar Capital, the independent financial adviser (IFA) in the exit offer for Amara Holdings, has deemed the voluntary cash offer at S$0.60 per share from a consortium linked to Albert Teo, the hotel group’s chief executive, to be “fair and reasonable”.

The IFA estimates the value of each share to be between S$0.53 and S$0.54. Among the valuation metrics used, the IFA looked at the price-to-net asset values (P/NAV) of several locally listed property companies and concluded that the final offer price’s ratio is above the mean and median ratios of the comparable companies.

The companies used for the comparison include OUE, Hotel Properties Limited, and Far East Orchard.

The opinion is despite the final offer price’s discount of 51.89 per cent to its S$1.247 revalued net asset value (RNAV) per share, or price to RNAV of 0.48 times.

The RNAV is significantly larger than the previously assessed net asset value. Its unaudited net asset value attributable to shareholders as at Jun 30, 2023 was S$383.4 million, while the IFA now reports its RNAV as S$717.1 million. Some S$349.6 million was added due to a revaluation surplus relating to the group’s leasehold land and buildings.

Elite Commercial Reit launched fully underwritten preferential offering at £0.27 apiece

Elite Commercial Reit launched a fully underwritten non-renounceable preferential offering at £0.27 per unit to raise about £28 million (S$47.2 million).

The gross proceeds will be mainly used to repay debt and reduce gearing, strengthening the Reit’s balance sheet. Some 103,354,690 new units will be offered to existing unitholders based on 214 preferential offering units for every 1,000 existing units.

At £0.27 per unit, the issue price represents a discount of 10 per cent to the volume weighted average price of £0.30 on Monday.

The transfer books and register of unitholders will be closed on Dec 27 at 5 pm to determine the provisional allotment of the new units to eligible unitholders.

The manager noted that the preferential offering is “strongly” supported by the Reit’s sponsors – Elite Partners and Sunway RE Capital – as well as its substantial unitholders. “They have irrevocably undertaken to subscribe in full for their respective pro-rata allotments of preferential offering units.”