Singapore shares may open lower amid negative leads from Wall Street and regional markets as interest rates appeared set to rise further and as trade jitters persisted.
Interest-rate sensitive shares, such as property and banks, may be in focus, while a slew of corporate news may keep investors busy.
The Dow Jones Industrial Average ended down 0.78 percent, the S&P 500 shed 0.68 percent and the Nasdaq lost 0.81 percent on Tuesday. Futures were nose down in early Asia trading hours.
The Nikkei 225 index opened lower, with the index down 0.34 percent at 8:14 A.M. SGT.
Wall Street’s decline was in part a case of good news is bad news for the market.
Positive U.S. retail sales data spurred optimism about U.S. economic growth, helping to push U.S. Treasury yield higher. The U.S. 10-year Treasury yield was at 3.07 percent at 8:03 A.M. SGT on Wednesday, touching its highest levels since 2011.
The dollar index, which measures the greenback against a basket of currencies, was at 93.94 at 8:06 A.M. SGT on Wednesday, up from levels below 93 in Asia trade on Tuesday, but off a high of around 93.43 touched in U.S. trade overnight.
Investors reportedly have been watching retail sales data for signals on when the tight labor market will start spurring inflation higher.
U.S. retail sales
U.S. retail sales rose 0.3 percent on-month in April and 4.7 percent on-year, in line with expectations, Reuters reported.
“Net, net, consumers are doing their part to power the economy forward by spending their tax cuts at shops and malls that helps make the economy grow,” Chris Rupkey, chief financial economist at MUFG, said in a note on Tuesday. “The steady spending results today on the part of consumers will keep the Fed on course to raise interest rates at a gradual pace with the next rate hike installment likely to come at the June meeting.”
However, sentiment on shares in the U.S. was also hurt after bellwether consumer play Home Depot reported sales on Tuesday that missed forecasts after a long winter bit into spring gardening sales; there were also concerns that the home repair company’s sales could be a canary in the coalmine for the U.S. housing market amid rising interest rates.
Global trade concerns remained at the fore, with former CNBC commentator and current White House economic adviser Larry Kudlow telling Politico that it wasn’t certain what the U.S. would do about Chinese telecom-equipment maker ZTE. That suggested another round of policy chaos from the White House was in the offing.
U.S. President Trump had taken to Twitter over the weekend to offer what appears to be a major concession to China ahead of talks between the two countries by saying he would help ZTE “get back into business, fast,” by instructing the Commerce Department to “get it done.” Last month, the U.S. had banned ZTE from doing business with U.S. companies for seven years as a penalty for illegal shipments to Iran and North Korea.
Speculation about Trump’s motivations on the ZTE reversal was rife, particularly after he violated the Iran nuclear pact on claims the Middle Eastern country was behaving “badly.” That speculation included a Huffington Post report that noted Trump’s reversal came “a mere 72 hours” after the Chinese government put as much as US$1 billion toward an Indonesian project that will personally enrich Trump and his family.
Other geopolitical concerns were on the horizon.
North Korea’s rule Kim Jong Un canceled a meeting with South Korea and threatened to cancel a meeting with the U.S. over the current joint air force drills between the U.S. and South Korea. Trump has been touting his planned meeting with Kim as a personal achievement.
Those were in the wake of fresh jitters after Trump’s decision to move the U.S. embassy in Israel to Jerusalem, a controversial campaign promise, resulted in protests in which Israeli troops killed at least 60. Thousands were reportedly injured. Images of the violence contrasted sharply with Trump administration officials’ smiling presence at the opening ceremony.
Analysts feared the embassy move could spur instability in the Middle East, especially after Trump’s decision to violate the Iran nuclear deal has also raised tensions in the region.
Keppel Offshore & Marine, via its subsidiary Keppel FELS, signed a deal to sell five existing jackup rigs to Borr Drilling for a total value of around US$745 million, the company said in a filing to SGX before the market open on Wednesday.
Borr Drilling will pay the first installment of US$288 million within 20 days of the deal signing, with the remainder due within five years of the delivery dates of each individual rig, on seller’s credit at market interest rates, the filing said. Delivery is expected from the fourth quarter of 2019 through the end of 2020, it said.
That pricing compares with the conglomerate’s January-to-March net profit of $337 million, which was up 34 percent on-year after the property division’s net profit rose nearly 300 percent on-year to S$387 million. The offshore and marine division posted a net loss of S$23 million for the quarter.
The rig price excludes down payments made by the rigs’ original owners, it said. The deal isn’t expected to affect earnings for the current financial year.
The rigs are currently being built to the KFELS B class designs, the filing said.
GIC, Frasers Property and JustCo
Singapore wealth fund GIC, Frasers Property and JustCo said they are teaming up with co-working space operator JustCo to develop a co-working space platform in Asia.
The three partners will invest US$177 million to help JustCo build up its Southeast Asian presence and expend into other markets in Asia, including Greater China (Hong Kong, Macau, China and Taiwan), South Korea, Japan, Vietnam, Malaysia, the Philippines, Australia and India, a filing to SGX before the market open on Wednesday said.
JustCo currently has a presence in Singapore, Indonesia and Thailand, it said.
Troubled commodity trader Noble reported a net loss of US$71.5 million for the first quarter, narrower than the US$129.3 million loss it reported in the year-earlier quarter. Revenue fell 39 percent on-year in the quarter to US$1.215 billion, Noble said.
“Global commodity prices strengthened in the first quarter of 2018, supported by both growth in demand and factors affecting supply such as production cuts and economic sanctions,” Noble said in a statement to SGX after the market close on Tuesday. “However, the group’s performance continues to be impacted by the ongoing constraints on liquidity and availability of trade finance to support its operations.”
It noted also that the sale of Noble Americas Corp. was completed at the start of the year, while the winddown of some remaining Global Oil Liquids working capital balances resulted in around US$525 million in net proceeds.
Operating income from supply chains was hurt by non-cash losses on contract-specific performance reserves in the quarter, which were against some net fair value gains on commodity contracts and derivatives, it said.
“The group continues to prioritise progressing through the final phase of the proposed restructuring with a view to providing the group with a sustainable capital structure and a strong foundation from which to deliver long-term value,” it said in its outlook statement.
Thai Beverage reported its fiscal second-quarter net profit rose 13.0 percent on-year to 7.433 billion baht, while revenue from sales rose 34.3 percent on-year to 67.603 billion baht. The company attributed the revenue rise to a 14.3 percent rise in spirits sales, a 74.4 percent risse in beer sales and a 107.7 percent rise in food business sales. That was offset by a 4.8 percent fall in non-alcoholic beverage sales.
For its fiscal first half, the company reported net profit fell 27.0 percent on-year to 10.451 billion baht, while excluding a non-recurring expense for acquisitions and finance costs, net profit would have fallen 9.9 percent to 12.91 billion baht. Revenue from sales for the six months ended March 31 was up 16.5 percent on-year at 113.207 billion baht.
The first-half profit decline was due to the net loss in the non-alcoholic beverage business increasing by 25 percent, as well as declines in net profit from the spirits, beer and F&N/FPL businesses, it said.
SIA Engineering, or SIAEC, reported fiscal fourth quarter profit attributable to the owners of the parent of S$55.0 million, up 19.8 percent on-year, while revenue fell 6.4 percent on-year to S$276.4 million, mainly due to lower air-frame and component overhaul and fleet management revenue.
For the full fiscal year ended March 31, profit attributable to the owners of the parent was down 44.6 percent on-year at S$184.1 million due to the year-earlier gain from the divestment of its 10 percent stake in Hong Kong Aero Engine Services. Excluding the year-earlier divestment, profit would have risen 7.0 percent.
Revenue for the full fiscal year fell 0.8 percent to S$1.095 billion on lower fleet-management revenue, the company said in a filing to SGX after the market close on Tuesday. But expenditure was down 1.3 percent, or S$13.6 million, at S$1.019 billion, mainly on lower staff and subcontract costs, partly offset by an exchange loss, compared with a year-earlier gain.
Singapore Airlines said the group passenger load factor improved 1.9 percentage points to 82.7 percent in April, while passenger carriage, measured in revenue passenger kilometers, rose 6.8 percent on-year, outstripping capacity, or available seat kilometers, which was up 4.3 percent.
Among the carrier’s segments, Singapore Airlines passenger load factor improved 1.7 percentage points in the month to 82.5 percent, while passenger carriage was up 3.6 percent on-year, it said. Silk Air’s passenger carriage was up 19.6 percent, ahead of an 11.3 percent capacity growth as strong demand growth in North and West Asia exceeded new capacity. Scoot saw passenger carriage rise 15.3 percent on-year in April.
The cargo load factor, however, fell by 3.0 percentage points in April, with cargo traffic falling 0.4 percent, the carrier said.
Sino Grandness reported its first quarter net profit attributable to shareholders fell 18.3 percent on-year to 43.1 million yuan, while revenue rose 14.6 percent on-year to 728.1 million yuan.
The maker of juices and canned fruit said in an SGX filing after the market close that the decline in net profit was mainly on higher distribution and selling expenses, including advertising and promotion, and a lower gross profit margin on-year.
Distribution and selling expenses for the quarter rose 32.7 percent on-year to 150.7 million yuan, the company said.
“Demand for our own-branded products have remained strong in the first quarter of 2018, especially our beverage segment which reported double-digit growth in sales,” Huang Yupeng, chairman and CEO, said in a statement after the market close. “To extend and diversify our product range, we have continued to invest resources to develop and launch new beverage products such as mango juice, coconut milk, apple vinegar and lactobacillus drinks.”
Cosco Shipping International (Singapore)
Cosco Shipping said its profit attributable to shareholders for the first quarter was S$2.83 million, swinging from a year-earlier loss of S$78.93 million, while turnover for the quarter surged 256 percent to S$40.65 million from S$11.41 million a year earlier.
The company said that in the first quarter of this year, it “transformed into one of Singapore’s leading logistics management service providers with the acquisition of 100 percent interest in the equity of Cogent Holdings.” It added that it also acquired around 40 percent of PT Ocean Global Shipping, establishing a logistics network in Singapore, Malaysia and Indonesia through the subsidiaries.
“The company aims to expand its logistics network in South and Southeast Asia through acquisitions and investments and is researching on potential targets to acquire and investment opportunities,” it said in the outlook portion of its filing to SGX after the market close on Tuesday. It added it expected to create “overall synergy” via cross sales in the related companies.
Yongnam Holdings reported a net loss of S$4.78 million for the first quarter, wider than the year-earlier quarter’s net loss of S$1.53 million. Revenue for the quarter fell 40.9 percent on-year to s$54.06 million, the company said in a filing to SGX after the market close on Tuesday.
“Our first quarter financial performance was mainly impacted by the generally lower level of activity for our Structural Steelwork segment, coupled with the continued low level of strutting and fabrication activities in Singapore and Hong Kong,” Yongnam’s CEO Seow Soon Yong said in the statement.
“But we are gearing up to tap opportunities related to the upcoming mega public sector infrastructure projects in Singapore to further strengthen our order book,” he added, nothing the company is actively pursuing S$1.1 billion worth of projects across Singapore, Hong Kong, Australia and the Middle East.
Cromwell European REIT
Cromwell European REIT will be added to the MSCI Singapore Small Cap Index, effective after market close on May 31, the REIT manager said in a filing to SGX before the market open on Wednesday.