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Author: traderhub8   |   Latest post: Fri, 16 Jul 2021, 12:06 PM


Phillip Capital Morning Note - 14 Jun 2021

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Asian stocks look set for a muted start to the week as investors prepare for a key Federal Reserve meeting. Futures were little changed in Japan. Trading volumes are expected to be light with a number of holidays in the region including in Australia, China and Hong Kong. U.S. futures were steady after stocks staged a late rally Friday, closing at another record after a choppy day of trading. Ten-year Treasury yields inched up to around 1.45% after hitting three-month lows on Thursday, but still notched their biggest weekly slide since December.

Bitcoin is on the move again, this time jumping above $39,000 Sunday afternoon in New York after Elon Musk said Tesla would resume transactions using the cryptocurrency when it's greener. In a tweet, he mentioned a threshold of “confirmation of reasonable (~50%) clean energy usage by miners with positive future trend.” Musk also reiterated the electric-car maker had sold about 10% of its Bitcoin holdings to demonstrate the token’s liquidity.

SG news

Enterprise Singapore's (ESG) Food Delivery Booster Package, which partly defrays delivery costs for food and beverage (F&B) businesses, is being extended by a month till July 15, ESG said on Sunday. The package defrays delivery costs via food delivery platforms and third-party logistics partners, and was re-introduced last month, originally to cover transactions from May 16 to June 15. It is being extended to support F&B businesses as Singapore transitions to Phase 3 (Heightened Alert), "and encourage them to continue with food delivery sales in the longer run", said ESG.

SIA Engineering Company (SIAEC) aims to rev up bottom line contribution from engine services. Engine services currently make only a modest contribution to the operating performance of SIAEC. But the mainboard-listed maintenance, repair and overhaul (MRO) services to the aviation sector is eyeing expansion in this space in the post-pandemic recovery. It also hopes to win business from the regional markets, and is keeping some powder dry for potential acquisitions. In March, SIA Engineering had created a new division to consolidate, develop and grow its engine services business. This division seeks to provide services such as engine maintenance, parts repair, storage and preservation, material management, on-wing services and engine testing.

Transporting a 40-foot steel container of cargo by sea from Shanghai to Rotterdam now costs a record US$10,522, a whopping 547% higher than the seasonal average over the last five years, according to Drewry Shipping. With upwards of 80% of all goods trade transported by sea, freight-cost surges are threatening to boost the price of everything from toys, furniture and car parts to coffee, sugar and anchovies, compounding concerns in global markets already bracing for accelerating inflation. A confluence of factors -- soaring demand, a shortage of containers, saturated ports and too few ships and dock workers -- have contributed to the squeeze on transportation capacity on every freight path. Recent Covid outbreaks in Asian export hubs like China have made matters worse. The pain is most acutely felt on longer-distance routes, making shipping from Shanghai to Rotterdam 67% more expensive than to the US West Coast, for instance. Often dismissed as having an insignificant impact on inflation because they were a tiny part of the overall expense, rising shipping costs are now forcing some economists to pay them a bit more attention. Although still seen as a relatively minor input, HSBC Holdings Plc estimates that a 205% increase in container shipping costs over the past year could raise euro-area producer prices by as much as 2%.

More Singapore-based senior bankers could potentially hop over to Hong Kong for business, spurred by the recent exemptions from the city's lengthy quarantines, say industry watchers. This comes as the Greater Bay Area is set to be the next battleground for local banks' expansion plans, with Hong Kong seen as a key gateway. Late last month, Hong Kong announced that fully vaccinated senior executives at financial institutions licensed by its Securities and Futures Commission can apply to travel in and out of the city without any need for a 21-day hotel quarantine, paving the way for them to carry out business upon landing. Currently, most people arriving in Hong Kong must isolate in a hotel for 14 or 21 days upon arrival. Only fully vaccinated travellers coming from "low risk" countries who tested negative for Covid-19, including Australia and New Zealand, can qualify for a seven-day hotel quarantine. That said, each financial company can seek exemptions for only four executives entering Hong Kong per month, comprising two visitors and two returning from elsewhere. Visiting executives must also comply with stringent rules - successful applicants can only leave their accommodation to attend approved activities stated in the trip itinerary

Retail and office S-Reits outperform despite tighter Covid-19 measures. On May 16, Singapore announced tighter measures to combat the increased number of local Covid-19 cases. The four weeks of tightened measures left malls, eateries and offices quieter as the country defaulted to working from home and dining-in at F&B establishments were prohibited. SGX lists 10 S-Reits with exposure to Singapore's office and/or retail segment. Despite lower footfall in the past four weeks (May 14 to June 10) due to Phase 2 (Heightened Alert) measures, these 10 S-Reits generated average total returns of 6.5 per cent, outperforming the 5.6 per cent average of the overall S-Reits sector and the Straits Times Index's 3.6 per cent total return. Together, the 10 S-Reits received net inflows of S$43.9 million from institutional investors. Among them, the three highest recipients of institutional net inflows were CapitaLand Integrated Commercial Trust (CICT), Suntec Reit and Frasers Centrepoint Trust (FCT).

US news

Grab Holdings chief executive officer Anthony Tan said he's confident the merger of the ride-hailing and food-delivery giant and a US blank-cheque company will be completed by year-end, following a delay caused by a review of its financials. The Singapore-based startup last week postponed the expected completion of the deal with Altimeter Growth - set to be one of the largest-ever mergers with a special purpose acquisition company - to the fourth quarter as it works on an audit of the past three years. When announcing the pact in April, Grab said in an investor presentation its completion target was July. Grab, which operates across Southeast Asia, is the latest company to be affected by intensifying scrutiny from US financial regulators on deals involving SPACs.

Shell weighs blockbuster sale of Texas shale assets. Royal Dutch Shell is reviewing its holdings in the largest U.S. oil field for a potential sale, people familiar with the matter told Reuters, marking a key moment in its shift away from fossil fuels as it faces growing pressure to slash carbon emissions. The sale could be for part or all of Shell’s position in the U.S. Permian Basin, located mostly in Texas, which accounted for around 6% of the Anglo-Dutch company’s total oil and gas output last year. The holdings could be worth more than $10 billion, the people said.

Microsoft (MSFT.O) on Sunday showcased 30 upcoming games and said most of those titles will be available on its monthly subscription service, Xbox Game Pass. The company said it would launch new games on Game Pass every month through the end of the year, including titles such as PC strategy series "Age of Empires IV" and racing game "Forza Horizon 5." One of Microsoft's big-ticket games, "Halo Infinite," is now set for a holiday launch this year after being delayed due to the challenge of developers being stuck at home during coronavirus restrictions. Several of the game launches announced by Microsoft at the E3 conference came from video game publisher Bethesda, behind hits such as Fallout and Doom. Microsoft last year bought ZeniMax Media, parent company of Bethesda, for $7.5 billion. Both Microsoft and Sony (6758.T) launched their next-generation gaming devices in November last year and have seen heightened demand for the consoles as gamers stuck at home due to the pandemic snapped up the devices.

Israel bet banks billions for venture firm Insight as Monday.com and WalkMe go public. Insight Partners, a New York-based venture firm, opened its first international office in Tel Aviv less than two years ago. The firm is notching big returns from its Israeli investments, most notably from its 43% stake in Monday.com, which went public last week. Collaboration software-as-a-service (SaaS) vendor Monday.com held its IPO and closed on Friday with a market cap of $8.2 billion. This week, fellow Israeli software company WalkMe, whose technology is designed to simplify enterprise software and applications, is scheduled to go public with a valuation of up to $2.6 billion

Exclusive Energy majors bid for Qatar LNG project despite lower returns. Six top western energy firms are vying to partner in the vast expansion of Qatar’s liquefied natural gas output, industry sources said, helping the Gulf state cement its position as the leading LNG producer while several large projects around the world recently stalled. Exxon Mobil, Royal Dutch Shell, TotalEnergies and ConocoPhillips, which are part of Qatar's existing LNG production were joined by new entrants Chevron and Italy's Eni in submitting bids on May 24 for the expansion project, industry sources told Reuters. The bids show energy giants continue to have appetite for investing in competitive oil and gas projects despite growing government, investor and activist pressure on the sector to tackle greenhouse gas emissions.

Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, PSR

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