Date: January 27, 2023
- The STI fell 0.04 of a point to 3,293.71, average daily volume was S$1.01b
- Wall St came under pressure after hawkish Fed comments; support came from tech stocks
- SATS shareholders voted in favour of WFS purchase
- Singapore’s NODX fell 20.6% in Dec
- China’s economy grew 3% in 2022
A flat week for the STI with Wall St not providing much direction
It was a week of ups and downs for the local stock market, with the Straits Times Index first tracking overnight moves on Wall Street, then rises and falls in the Dow futures.
The US market spent the five days worrying about the direction of interest rates following comments by key US Federal Reserve officials as well as corporate earnings; however, providing support was a rally in technology stocks.
Ahead of the Chinese New Year holidays volume here initially tapered off but picked up on Friday when the STI rallied 17 points with 1.24b units worth S$1.27b done – the highest turnover for the week.
Ultimately however, with the US market not really providing much in the way of direction, the STI recorded a 0.04 of a point loss for the week at 3,293.71. Boosted by Friday’s spike in volume, average daily turnover amounted to S$1.01b.
How Wall St fared – stocks under pressure after hawkish Fed statements
The Dow Jones Industrial Average on Tuesday retreated 392 points, or 1.1%. It was dragged down by Goldman Sachs, which reported disappointing earnings. Goldman’s stock was down 6.5% and had subtracted 159 points from the index during the day, according to Dow Jones Market Data.
The S&P 500 had its worst day of the year on Wednesday following hawkish comments from Federal Reserve officials. The Dow Jones Industrial Average tumbled 614 points, or 1.8%, and the S&P 500 lost 1.6%. The Nasdaq Composite was down 1.2%, snapping a seven day winning streak.
Cleveland Fed President Loretta Mester said in an AP interview that interest rates need to continue rising to fight still too-high inflation. “We’re not at 5% yet, we’re not above 5%, which I think is going to be needed,” Mester said.
Also on Wed, St. Louis Fed President James Bullard made similar remarks in an interview with The Wall Street Journal. Bullard said the Fed should not stop raising interest rates until they are higher than 5%, “to say with a straight face that we’ve got the right level of the policy rate that will continue to push inflation down during 2023.”
On Thursday, Fed Governor Lael Brainard said in a statement that more interest rate hikes may be needed to bring down inflation.
“Even with the recent moderation, inflation remains high, and policy will need to be sufficiently restrictive for some time to make sure inflation returns to 2% on a sustained basis,” Brainard said.
Meanwhile, Microsoft announced on Wednesday that it will be laying off 10,000 employees, causing the stock to fall 1.9% and dragging on the Dow. Also, earnings from financial services giant Charles Schwab came in before the opening bell and showed that the bank missed analysts' expectations for the fourth quarter. The stock fell 2.5%.
For the week, the Nasdaq gained 0.6%, while the Dow and the S&P slipped 2.7% and 0.7%, respectively.
SATS shareholders voted in favour of WFS purchase
Shareholders of airline ground handler and cargo carrier SATS last week voted overwhelmingly in favour to buy Worldwide Freight Services for about S$1.82b.
The vote, which was held in person and via electronic means, garnered 96.8 per cent of the total number of votes in favour of the resolution to approve the transaction. In all, there were some 647.6 million shares represented by votes at the EGM, of which 626.9 million were in favour.
SATS needed just a simple majority of 50 per cent voting in favour. Voting was conducted by a simple poll, where shareholders vote “for”, “against” or abstained.
The purchase of WFS – which will be financed via S$320 million of internal funds, some S$700 million in euro-denominated term loans, and an S$800 million rights issue of SATS shares – is expected to be completed in March-April 2023.
Singapore’s NODX fell 20.6% in Dec
Non-oil domestic exports (NODX) for December fell 20.6 per cent from a high base a year earlier, the worst contraction in nearly a decade. The contraction was also worse than Bloomberg’s forecast for a 16.8 per cent drop and the revised drop of 14.7 per cent for November.
For the whole of 2022, NODX grew by 3 per cent – just half of the official forecast for around 6 per cent growth.
The Business Times quoted UOB senior economist Alvin Liew saying “the worsening electronics performance, and increasingly weaker demand from major export destinations – especially China and the ASEAN region – are clearly weighing negatively on NODX momentum and manufacturing demand’’.
Maybank economists Chua Hak Bin and Lee Ju Ye said they expect the downturn in manufacturing and trade-related services to extend into the first half of 2023 as external demand deteriorates for electronics and non-electronics.
The sharp plunge in Dec’s figures may result in a downward revision to Singapore’s final fourth quarter gross domestic product numbers. Maybank expects NODX to shrink by 1-4% this year, reversing three consecutive years of growth.
RHB in the meantime expects NODX to contract year-on-year between January and July this year but hopes that China’s reopening will help the second half numbers. RHB has kept to its NODX growth forecast of 1% in 2023 and does not forecast a technical recession this year.
China’s economy grew 3% in 2022
China’s economy grew 3% in 2022, significantly below the original target of 5.5% as the country’s zero-Covid policy took a toll.
Economic growth sank to 2.9% over a year earlier in the three months ending in December from the previous quarter's 3.9%, the National Bureau of Statistics reported.
Moody’s Analytics economist Harry Murphy Cruise said China’s fourth quarter was “one of disruption’’ and that it was a disappointing end to the year for the world’s second-largest economy.
However, some analysts expect a recovery this year because of China’s reopening and policy stimulus. "Reopening should result in a burst of growth over the coming year," said Goldman Sachs economist Andrew Tilton in a report Friday. Goldman raised its outlook on this year's expansion to 5.2% from 4.5%.
JP Morgan Asset Management’s Chaoping Zhu said high-frequency indicators are pointing to a quick recovery of economic activities as the Covid infections have probably peaked. “Looking forward, we expect to see a sustained economic recovery in 2023 as a result of reopening and policy stimulus. Service sectors should be the early beneficiary when pent-up demand is released’’.
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