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Weekly Sprout

Wrong about a recession

15 Jul 2023

Singapore averts a technical recession and U.S. inflation cools

This week, we saw more signs that we might be able to avoid a recession.

Singapore's economy expanded by 0.3% in the second quarter, reversing from a contraction in the previous quarter. 

This brought much to cheer to investors, especially with signs that inflation is starting to cool in the U.S.

With bond yields in the U.S. coming down, we examine what this might mean for the upcoming 6-month T-bill auction on 20th July. 

If you are exploring Singapore REITs as a way to earn a higher yield compared to T-bills, we look at the best performing REITs in the first half of 2023, and how you can choose the best REIT for your portfolio. 

Lastly, we analyse why OCBC has been favoured compared to DBS and UOB for investors looking for dividend yield. 

Weekly stock recap 15 July 2023
Source: Bloomberg. Price as of market close on 14 July 2023

 

❄️ U.S. INFLATION COOLS

What happened? 

Inflation in the U.S. eased further, with the consumer price index (CPI) rising by just 3% in June, the slowest pace of increase since March 2021. 

What does this mean?

The slower pace of inflation has not changed the market’s expectations that the Federal Reserve will raise interest rates by another 0.25% later this month. 

However, investors are increasingly optimistic that the Fed is close to the end of its rate hike cycle.

Based on the CME FedWatch Tool, investors believe it is likely that the benchmark interest rate will be lower in May next year compared to where it is today.     

Why should I care? 

Global stocks rallied with growing hopes of a peak in interest rates, with the tech-heavy Nasdaq index rising by 3.3% this week.

In Singapore, the Straits Times Index (STI) saw a even more significant bounce of 3.5%.

 

💡 THE BIG IMPORTANT STORY

Will the T-bill yield fall with declining US bond yields?

The next 6-month T-bill auction will be on 20th July 2023. 

T-bill Singapore auction 20 July 2023.jpg

 

🚗 WHAT'S MOVING

  • Microsoft (MSFT) cleared major hurdles to its planned purchase of Activision Blizzard after a US judge approved of the transaction and a British regulator suggested that it could reconsider its opposition.
  • JPMorgan (JPM) reported better than expected earnings on higher interest rates and strong bond trading revenue.
  • Taiwan Semiconductor Manufacturing Co (TSMC) reported better than expected revenue as a boom in artificial intelligence applications led to increased demand for chips.
  • Seatrium has secured a green trade finance facility from OCBC worth an estimated EUR 720 million. The facility is one of the largest syndicated financing solutions issued by a single bank for the maritime industry. 
  • Nanofilm issued a profit warning and expects to to report a net loss of approximately S$8 million for the first half of 2023 due to a fall in revenue. The company will also be deferring its 2025 target of attaining S$500 million in revenue and S$100 million in profit due to the challenging environment.

Source: Bloomberg, CNBC, Financial Times, Business Times, Edge Singapore

 

🤝 A MESSAGE FROM OUR PARTNER

Here’s why ETFs are gaining popularity as an SRS investment option

We find out why more SRS account holders are investing in ETFs to grow their retirement nest.

SRS Investing with ETFs.jpg

 

🤓 WHAT WE’RE LOOKING OUT FOR THIS WEEK

  • Tuesday, 18 Jul: U.S. retail sales data, Bank of America, Morgan Stanley earnings
  • Wednesday, 19 Jul: Tesla, Netflix, Goldman Sachs earnings
  • Thursday, 20 Jul: Singapore 6-month T-bill auction

Source: Bloomberg, SGX 

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