Your bite-sized weekly update (19 June)

By Beansprout • 18 Jun 2022 • 0 min read

Global central banks raise interest rates causing markets to fall

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What happened in the past week?

 

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Weekly price change as of market close on 17 June 2022. Source: Bloomberg. 

 

It was a tough week for global financial markets, as US stock indices saw the sharpest declines since 2020.

It wasn’t just the US Fed that raised interest rates in the past week. The Bank of England and more surprisingly, the Swiss National Bank, also hiked interest rates. 

The exception here was the Bank of Japan, which maintained its ultra-low interest rates. 

This has led to growing concerns that the hike in interest rates across numerous countries will lead to a global recession. 

Recession or not, JPMorgan strategists say that the S&P 500 index is now implying a 85% chance of a US recession. 

As of Friday’s close, the S&P 500 has fallen close to 23% from its January peak. According to estimates from the strategists, the average decline of the S&P 500 during the past 11 recessions was 26%. 

It was also a challenging week for cryptocurrencies, as Bitcoin fell below $20,000 for the first time since November 2020. 

Investors are concerned about increasing strain in the digital asset space after crypto lenders Celsius Network and Babel Finance announced that they would pause withdrawals and transfers. 

Crypto hedge fund Three Arrows Capital (3AC) confirmed to the Wall Street Journal that it has suffered heavy losses, and is now working with legal and financial advisors. 

What you need to know

What the Fed’s largest rate hike since 1994 means for your investments

The US Federal Reserve (Fed) raised its benchmark interest rate by 0.75 percentage point, and said that the next decision in July would be between a 0.5 and 0.75 percentage point hike.

What the Fed says and does in the coming months will affect how your investments will perform. And one thing is almost certain – the Fed will be looking out closely for inflation numbers. 

Read more here.

Frasers Hospitality Trust privatisation offer - 3 things you need to know

Frasers Property has made an offer to privatize Frasers Hospitality Trust (FHT) at S$0.70. This would imply a price to net asset value (NAV) multiple of 1.07x, above the current valuation of other Singapore-listed hospitality REITs. It also represents a higher premium compared to other S-REIT privatisations we have seen.

With the privatization offer, investors will probably start looking at which other REITs are trading at a significant valuation discount to their book value. Some of these names include CapitaLand China Trust, Starhill Global Reit, Far East Hospitality Trust, IReit Global and United Hampshire US Reit.

Read more here

What to look out for in the week ahead 

It will be a shortened trading week in the US as the markets will be closed on Monday. 

With everyone focusing on what the US Fed will do in the coming months, investors will be looking out for what Fed Chairman Jerome Powell will say in his testimony to the Congress on Wednesday and Thursday. 

In a light week for earnings, FedEx is expected to report after the market close on Thursday. 

 

 

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