18th July, 2022 – Updates

Market Morning Brief        

Global Market Indices	As at July 15	As at July 18	Change	% Change
DJIA	31,288.26	31,072.61	-215.65	-0.69%
S&P 500	3,863.16	3,830.85	-32.31	-0.84%
NASDAQ	11,452.42	11,360.05	-92.37	-0.81%
FTSE 100	7,159.01	7,223.24	64.23	0.90%
DAX	12,864.72	12,959.81	95.09	0.74%
STOXX50E	3,477.20	3,511.86	34.66	1.00%
Nikkei 225	26,643.39	26,788.47	145.08	0.54%
Shanghai Composite	3,228.06	3,278.10	50.04	1.55%
SZSE Component	12,411.01	12,532.65	121.64	0.98%
Hang Seng Index	20,297.72	20,846.18	548.46	2.7%
STI	3,099.15	3,121.76	22.61	0.73%
KLCI	1,418.44	1,429.54	11.10	0.78%

US: Markets dip with inflation expectations, a jump in oil prices and yield inversion

Major US equities dipped slightly with Nasdaq -0.89%, S&P 500 -0.84% and Dow Jones Industrial Average -0.69%. Apple also weighed down the market following its reports on has reported to slowing down its hiring and reducing its capex spending in 2023 with macroeconomic headwinds lurking.

Healthcare and utilities slid lower and energy shares rose as oil prices continued to loom.

Earnings calls for Goldman Sachs Group (GS) reported eps and revenue were positive, beating market expectation. They were the top gainer for DOW. Bank of America reported lower Q2 earnings as underwriting activities weakened over the years as interest rates climbed.

With surveys in industry by CME Group’s FedWatch Tool, there is a 31% possibility of a 100 basis point rate hike in the upcoming Federal Reserve meeting on 26-27 July. This represents a high possibility of another 75 basis point for the next meeting. (Not sure what you hope to say? is it the 100 or 75 basis point that influences the market?) With higher interest rates earnings for banks will be affected. (Of course, higher interest rates will affect bank earnings. The question is – will that be positive or negative impact? Ang how would that influence the market going forward?)

The National Association of Homebuilders’ monthly housing market index fell to 55 in July from 67 in June. This was below expectations of the market at 65. This may will impact the construction and property sector as outlook for sales are is expected to fall over the upcoming months. 

The US will have a greater default in mortgage if the US hikes again as there is a start in defaulting in payments, we expect future mortgage to increase in defaulting payment. (You are recycling ‘default’ three time in this sentence which explains nothing as it is nearly a circular argument.) The hike in interest rates is likely to see greater default in mortgages and greater bad debt provisions by the banks. Banks may want to increase bad debt accounts. Future Revenues and earnings for banking may are likely to dip in Q3 and Q4. 

The market will continue to monitor the large amount of earning calls over the week by the likes of Johnson & Johnson and Netflix in the next coming trading sessions. 

EUROPE: European markets undulating were rattled by with ECB’s decision (what decision? ECB makes a lot of decisions) and persistent oil prices will weigh in further

The EU has been running hot with inflation at a record high of 8.6%. The European market sentiment is unsettled about by the ECB’s position to raise interest rate in the upcoming days (21th July), where the possibility of 25 basis point is most definite but chances of a hike to 50 basis point isn’t a possibility could not to be ruled out.

Italy and Spain has posted consecutive trade deficit figures since December 2021. This shows Italy will have to use reserves to supplement these trade deficits and potentially affect the debts (Don’t quite understand). Spain experienced high levels of trade deficit as they are entirely dependent on imports for oil and gas. The Russian invasion of Ukraine has led to record high prices for oil and gas supplies. This imported inflation will continue as the Ukraine war persists, and prolonged trade deficit will weigh down heavily on the European market. The maintenance work on Nord Stream 1 is delayed as economic sanctions limits Canada to proceed. There is a high possibility of disruption. This will continue to further weigh down the European markets in the upcoming days. 

ASIA: Market close higher with inflation fears subsiding

Asian stock markets are trading mostly higher on Monday, following the broadly positive cues from the global markets on Friday, as fairly encouraging economic data from the U.S. and upbeat earnings updates from some top companies helped lift sentiment. Traders also reacted positively to a slew of U.S. economic data, including a report showing retail sales jumped by more than expected in the month of June and U.S. consumer sentiment unexpectedly showed a modest improvement in the month of July.

Hang Seng Index (Headline?)

Hong Kong’s stocks climbed on Monday, after regulators sought to defuse a growing consumer boycott of mortgage payments by urging banks to increase lending to developers so they can complete unfinished housing projects. The guidance from the China Banking and Insurance Regulatory Commission was issued in response to the boycotts and is aimed at expediting the delivery of homes to buyers

The Hang Seng Index jumped 2.7%, led by property shares, snapping a five-day loss, following a report that the nation’s banking regulator urged lenders to support the sector amid a growing mortgage boycott. 

Top performers included KWG Group Holdings Ltd. and Guangzhou R&F Properties Co., which were up at least 9% in Hong Kong.

Country Garden Holdings Co. — China’s largest builder — was among the top gainers following a report that the nation’s banking regulator urged lenders to support the real estate sector amid a growing mortgage boycott. A gauge of tech shares closed 3% higher.

Renewed concerns over the ailing property sector and doubts over Beijing’s stance on tech regulation had sent stocks on a downward spiral after a stellar June. (Does this sentence not contradict the last sentence in the previous para?)

The Hang Seng Index plunged 6.6% last week, the most since March 2020, taking losses from a June 28 high to almost 10% and putting the gauge on track for a technical correction.

Shanghai Composite (Headline?)

PBOC Governor Yi Gang pledged that the central bank will “increase implementation of prudent monetary policy” to support the real economy, which is facing downward pressure due to COVID-19 and external shocks.

Chinese regulators on Sunday urged banks to extend loans to qualified real estate projects and meet developers financing needs where reasonable, in an effort to ease concerns triggered by a widening mortgage-payment boycott on unfinished houses.

Rising COVID-19 cases, lockdowns, and woes in property-sector remain headwinds for China’s economic recovery.

Singapore: STI closed 0.74% higher with banks transitioning to SORA, inflation stabilizes (Good to be consistent. Just bold the headline.)

In Singapore, market sentiment was also lifted by non-oil domestic exports (NODX) data released on Monday, which showed a 9 per cent year on year growth in June. This show the 

The biggest gainer among Singapore’s blue-chip stocks was DFI Retail Group, which climbed 2.8 per cent or US$0.08 to close at US$2.97. Jardine Cycle & Carriage, a member of the Jardine Matheson Group, was also among the top gainers. The counter rose 2.7 per cent or S$0.71 to S$27.41. The trio of local lenders all finished higher. DBS gained 1 per cent or S$0.29 to close at S$29.96, UOB rose 1.4 per cent or S$0.37 to S$26.41 and OCBC closed up 1.1 per cent or S$0.12 at S$11.34.

At the bottom of the table was Genting Singapore, which closed 1.9 per cent or S$0.015 lower at S$0.79 after dismissing rumors of a potential deal with MGM Resorts International. Genting Singapore was also the most heavily traded counter among the index constituents, with 38.9 million shares traded. (Try to reword the text in your own words. It seems like some sentences are taken from news wholesale.)

Survey has shown Singapore’s inflation to hit 3.9% in 2023. (It’s about expectation and not a reality of actual inflation.) This is indicative that most experts believe inflation will reduce slighly over the coming months. (You should join the first and second sentences together.) We believe the MAS will continue to widen the policy band and reduce imported inflation as Singapore depends largely on imports for goods and services. This will increase disposable income and retail will increase. (This conclusion is a leap from the previous sentence, and is not clear in its casual-effect linkage.) 

South and South-east Asian Currencies are outperforming their developed-nation peers as economic reopening and swift central bank action have helped offset the impact of a stronger US dollar. Indonesia’s rupiah (fallen 5 per cent) and SIngapore’s dollar (fallen 3.5 per cent) – (SEA Top performers) have fallen less than half as much as the euro which is down 11 per cent this year against the US currency. This shows imported inflation for non-developed (is there such a term being used in discussion?) countries will rise further but the impact to Singapore will be minimal. 

Economic Morning Brief

Global: U.S. bond yields rose on 18 July

U.S. yields rise but off highs as stocks end lower.

The two-year (US2YT=RR) U.S. Treasury yield, which typically moves in step with interest rate expectations, was up 3.7 basis points at 3.172%.

The yield on 10-year Treasury notes (US10YT=RR) was up 5.7 basis points at 2.987%.

The yield on the 30-year Treasury bond (US30YT=RR) was up 6.2 basis points at 3.156%.

The gap between yields on two- and 10-year Treasury notes (US2US10=RR), seen as an indicator of economic expectations, was at -18.8 basis points. (Copy cat sentence?)

This further deepens the yield curve inversion signaling the imminent recession of the US economy. (This should be the headline: The deepening of the yield curve inversion signals an imminent recession in the US.)

Global: Japan, China cut holdings of U.S. Treasuries to multi-year lows -data

Japan and China pared back holdings of U.S. Treasuries in May to multi-year lows.

Japan’s holdings fell to $1.212 trillion, the lowest since January 2020, when the country’s stash of Treasuries was $1.211 trillion. In April, Japan’s holdings were at $1.218 trillion.

China’s hoard of U.S. government debt dropped as well to $980.8 billion in May, still the lowest since May 2010 when its holdings were at $843.7 billion, data showed. In April, China had $1.003 trillion in Treasuries.

The world’s second largest economy has reduced holdings of Treasuries for six straight months.

The depegging in USD holding by countries and reduction of US debt is a sign of weakening confidence in the US market is weak. 

Industry/Sector Morning Brief

Utilities, Energy, Oil & Gas: (Headline?)

Singapore’s wholesale electricity price surged for the second time in a week, a sign of further volatility in the market in the midst of global power crunch. We expect private electricity providers to have lower margins (should it be positive for their margin?) and cost of operating business for the manufacturing sector to be highers. This will impede the economic growth of Singapore. (Investment call?)

Retail, Consumers, Food & Beverage: (Headline?)

Code of conduct covering retail space leasing to be turned into law. (This is more like a headline than a sentence.) The recommendation by the Fair Tenancy Industry Committee (FTIC) to legislate compliance with the code of conduct (COC) for fair tenancy has been accepted by the Singapore government. In the lead up to the impending legislation, MTI will conduct a public consultation from Jul 18 to Aug 5, 2022 to gather feedback on the key provisions, which will also include the establishment of a facilitated dispute resolution process. (Investment call?)

Automobile: (Headline?)

JARDINE CYCLE & CARRIAGE LIMITED: Acquisition of Cycle & Carriage Bintang Berhad

JARDINE Cycle & Carriage : C07 +2.66% has made an unconditional voluntary take-over offer for the nearly 10 per cent stakes it does not already own in Malaysia-listed Cycle & Carriage Bintang at RM2.70 a share. 

The market closed at $26.7 on 14th July, after its acquisition of Cycle & Carriage Bintang Berhad. It has been trending upwards ever since closing at $27.33 when the market closed on 18 July 2022. The stock should be closely monitored in the following weeks in its movements. (Hold)

Tourism: (Headline?)

GENTING SINGAPORE PLC: Dip in share price after negotiations falls through

Genting Singapore shares jumped on Friday after Bloomberg News reported (meaning of the underline?) that it was attracting takeover interest. The approach was unsolicited and has not been pursued, as mentioned by Genting Bhd executive chairman Lim Kok Thay to the Singapore Exchange.

Shares in Genting Singapore rose as much as 9.3 per cent on the news of a potential takeover, reaching their highest price in nearly two years. The stock price has been on a downward trend ever since, losing 1.9 per cent or S$0.015 on Monday (Jul 18) to finish the day at S$0.79.

However, there are other potential suitors who are in the preliminary stages of studying Genting Singapore. (Hold)

Banking and Financial Instiution: (Headline?)

Singapore’s banks were strongly encouraged to make efforts to transition to Singapore Overnight Rate Average (Sora) from Singapore Interbank Offered Rates (SIBOR) and Swap Offer Rate (SOR). This transition will help reduce sudden interest rate spikes and will only gradually account for over time. This will have allow retail consumers and SME to have enjoy lower credit premiums. This benefits retail consumers and SME to have better affordability on loans and could be a positive indicator for bank shares to rise in Singapore. With loans being made more affordable, the earnings of the banking sector is expected to improve. (Investment call?)

(Useful table below.)