SINGAPORE (Nov 19): The British pound was battered, falling the most in a day since June 2017, after several UK ministers resigned in protest of Prime Minister Theresa May’s Brexit divorce plan.
Brexit Secretary Dominic Raab led the exodus, less than 24 hours after May announced on Nov 14 that she had won cabinet approval for a deal with the European Union. Work and Pensions Secretary Esther McVey followed suit, accusing the prime minister of failing to honour the result of the 2016 referendum vote to leave the EU. Northern Ireland minister Shailesh Vara and junior Brexit minister Suella Braverman have also quit, plunging the UK government into crisis.
On Nov 15, the sterling dropped by nearly 2% against the US dollar to US$1.2780, as Brexit worries sent shockwaves through the currency market.
Raab’s departure, in particular, stoked fears of a revolt against May that will throw into doubt her ability to secure Parliament’s support for her plan — and even to survive as leader. Analysts say the danger that May could be replaced and Britain could crash out of the EU with no deal is an unpredictable and high-risk scenario for markets.
However, May defended her plan as the only way to protect the union of the UK. “The choice is clear: We can choose to leave with no deal, we can risk no Brexit at all, or we can choose to unite and support the best deal that can be negotiated,” she says.
SIA earnings dive
On Nov 15, Hong Kong’s Hang Seng Index and the two key Chinese markets, Shenzhen and Shanghai, led gains across Asia, on hopes that US-China trade tensions will ease as top leaders of the two countries meet for talks at the end of the month in Argentina. The Straits Times Index gained 11.34 points to close at 3,054.53 points, reversing four straight days of decline.
While many index stocks and smaller counters rose, Singapore Airlines was a notable underperformer. Its share price dropped after it reported its biggest profit decline in at least seven years. SIA on Nov 13 posted an 81% y-o-y fall in earnings to $56.4 million for 2QFY2019 ended September on the back of higher fuel prices. In the year-earlier quarter, the flag carrier made $293.3 million. This led to a flurry of downgrades by analysts.
DBS Group Research, for example, cut its call on SIA to “hold” from “buy”, and lowered its price target to $10.20 from $12.40. “We lower our FY2019F and FY2020F estimates by 31% and 23% respectively to reflect lower passenger yield assumptions and the one-off losses at Virgin Australia, and expect consensus to also cut forecasts,” says analyst Paul Yong in a report on Nov 14.
After touching a high this week of $9.79 on Nov 12, the day before its results announcement, shares in SIA fell nearly 5% to close at $9.32 on Nov 15.
The week ahead
There has been a hive of activity in Singapore this past week as the country plays host to the Asean summit and a series of other high-profile events and meetings. This past week also marks the end of the 3Q earnings reporting season. Nevertheless, there will be a series of scheduled macroeconomic data to be reported. For example, on Nov 20, the level of US housing starts will give an indication of how the US economy is holding up, followed by initial jobless claims the following day. On Nov 23, Singapore will report its consumer price index for October.
