SINGAPORE (Oct 15): The benchmark Straits Times Index skidded to 20-month lows on Oct 11 on the back of a heavy selloff in the US. The STI closed that day 2.7% lower at 3,047.4 points.
US stocks saw their biggest decline in more than six months on Oct 10 as investors accelerated their retreat from fast-growing technology stocks in favour of shares that have been overlooked, sparked in part by the recent jump in government bond yields and the Federal Reserve’s bid to tighten monetary policy.
Kelvin Tay, regional chief investment officer of UBS Global Wealth Management, maintains an upbeat view. He calls this correction “fairly normal” and believes the bull market is likely to be further extended. “What hasn’t changed over the past week are the solid US economic and earnings fundamentals. With the 3Q earnings season about to start, we expect earnings per share growth of 23% to 24%, very similar to the first two quarters of this year.”
Earlier in the week, the International Monetary Fund said the world economy was plateauing. It cut its growth forecast for the first time in more than two years, blaming escalating trade tensions and stresses in emerging markets. IMF now expects world GDP to grow 3.7% this year and next, down from 3.9% seen just three months ago.
On the morning of Oct 12, after this issue of The Edge Singapore has gone to print, the Monetary Authority of Singapore will announce its next policy statement. Economists are undecided about whether MAS will further tighten its monetary policy, bringing about a stronger Singapore dollar, or remain neutral to maintain competitiveness amid rising trade tensions. In the previous review in April, MAS moved towards a slow but steady appreciation path, marking the first monetary tightening in six years.
Keppel family earnings
On the local corporate front, shares in Chip Eng Seng crashed 10% on Oct 8. Punters betting on a takeover offer were caught wrong-footed when the buyer of the controlling Lim family’s 29.73% stake avoided the 30% threshold that would have triggered a mandatory takeover offer. Celine Tang, managing director of SingHaiyi, paid $201 million, or $1.08 a share, to seven key Chip Eng Seng shareholders, including founder Lim Tiam Seng. The stock closed at 75 cents on Oct 11.
The Keppel group of companies will also be releasing their results this week. Keppel REIT will be reporting on Oct 15; Keppel DC REIT and Keppel Infrastructure REIT on Oct 16; and Keppel-KBS US REIT and Keppel Telecommunications & Transportation on Oct 17. Keppel Corp, the parent company, will report on Oct 18.
On Sept 27, Singapore Press Holdings and Keppel announced a pre-conditional voluntary offer for M1 at $2.06 a share. Axiata
Group — the majority shareholder of M1, with a 28.7% stake — is reviewing its options and has yet to announce its decision. SPH will report full-year earnings on Oct 15.
At the same time, Keppel and Keppel T&T have proposed a scheme of arrangement to privatise the latter with an offer of $1.91 per share.
First REIT will announce 3QFY2018 results on Oct 16. According to a Sept 18 filing, OUE Lippo Healthcare will be acquiring a 10.6% stake in First REIT as well as a 40% stake in its manager, Bowsprit Capital Corp, for a total consideration of $142 million.
Other companies reporting results this week include Qian Hu on Oct 16, Soilbuild REIT on Oct 17 and Fraser Commercial Trust on Oct 19.
