Weekly Sprout

Macro

Your bite-sized weekly update (6 Aug)

06 Aug 2022

Pelosi's Taiwan visit, Alibaba earnings surprise, & lots to cheer in Singapore

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THIS WEEK IN MARKETS

There’s a lot to cheer if you are an investor in the Singapore market. 

The Straits Times Index (STI) is one of the best-performing indices globally so far this year, with a year-to-date gain of 5.1% as of 5th August 2022. 

The recent earnings season also brought many positive surprises for investors

  • SIA’s 2Q22 operating profit was its second highest in history
  • Wilmar reported a 55% increase in its profit in 1H22, and declared its highest interim dividend in its history
  • Sembcorp Industries’ 1H22 profit surged 11 times, and “may reward investors with a special dividend” for FY2022. 
  • Raffles Medical’s 1H22 profit rose 51% with the recovery of medical tourism  

With all the gloom from recession concerns and rising inflation, let’s take a moment to celebrate the recovery we've seen. 

Happy 57th birthday Singapore!

IMPORTANT

Weekly wrap 6 Aug
Source: Bloomberg. Weekly price change as of market close on 5 Aug
  • Pelosi visits Taiwan. US House Speaker Nancy Pelosi’s trip to Taiwan this week led to deteriorating relations between US and China. China reacted by cutting off defence talks with the US, stepping up military drills and imposing trade restrictions on Taiwan. 
  • The red-hot job market in US. The US economy added 528,000 job in July, more than double the 250,000 jobs economists expected. The buoyant labour market has helped to ease concerns of a recession  
  • Chinese growth slows. China’s official manufacturing purchasing managers’ index (PMI) fell to 49.0 in July from 50.2 in June. The reading was the lowest in 3 months, and below market expectations for an improvement to 50.4.

ICYMI

  • Alibaba reported revenue and earnings that were above market expectations.  Revenue of RMB 205.55 bn was above expectation of RMB 203.19 bn, and net income of RMB 22.73 bn was above expectation of RMB 18.72 bn. The company noted signs of recovery in June following a relatively slow April and May. 
  • Chinese EV companies reported a rise in July car deliveries compared to the previous year. Xpeng delivered the most number of cars amongst the 3 EV companies.
  • Uber reported revenue above expectations and turned cash flow positive for the first time
  • DBS 2Q22 profit rose 7% YoY to $1.82bn, exceeding market expectations. Higher interest rates boosted its net interest margin (NIM) by 12bps. An interim dividend of S$0.36 was declared for 2Q, bringing 1H dividend to S$0.72 per share. 
  • OCBC’s 2Q net profit rose 28% YoY to S$1.48 bn, and was above market expectations. Net interest income rose to a new high as it gained from higher interest rates, and non-performing loans fell to 1.3%. An interim DPS of S$0.28 was declared, up from $0.25 previously.
  • Sembcorp Industries announced its profit surged nearly 11 times in 1H22 to $490 million, boosted by higher electricity prices in Singapore and India. An interim dividend of S$0.04 was declared. 
  • Wilmar’s 1H22 profit rose 55% to US$1.2bn on the back of improved performance across all key business segments. An interim dividend of S$0.06 was proposed, the highest interim dividend since listing.
  • Raffles Medical Group reported a profit of nearly $59.7 million for the half year ended June 30, a 51.3 per cent rise compared with the $39.4 million a year ago. This came largely on the back of higher revenue from Covid-19-related services as well as a comeback in medical tourism as Singapore reopened its borders. 

Source: Bloomberg, CNBC, Business Times, Edge Singapore

THE BIG IMPORTANT STORY

Why we’re staying away from the 50-year Green SGS (Infra) bond

We’re giving the SGS Green (Infra) bond a miss as the yield is not attractive enough for us to invest in such a long-tenor bond given the risks.

SGS Green (Infra) bond

WHAT’S UP THIS WEEK

Monday, 8 Aug

  • Singapore: Lendlease Global Commercial REIT earnings
  • US: Palantir earnings

Tuesday, 9 Aug 

  • Singapore: Public Holiday
  • US: Coinbase, Roblox, Unity Software earnings

Wednesday, 10 Aug

  • US: Disney, Coupang earnings
  • US CPI

Thursday, 11 Aug

  • Singapore: Capitaland Investment, City Developments earnings
  • US: Rivian earnings

Friday, 12 Aug

  • Singapore: Genting Singapore, ST Engineering, AEM Holdings, Sembcorp Marine earnings
  • US: UMich Inflation Expectations

Get the full economic and Singapore earnings calendar on the SGX Academy

Source: SGX, Bloomberg, Refinitiv

THAT’S INTERESTING

  • Did the crypto crash kill luxury brands? After Bloomberg reported that the collapse in cryptocurrencies is depressing prices for hard-to-get luxury watches, we decided to investigate if luxury brands are really struggling. Richemont, whose portfolio includes watch brands such as Panerai and Piaget, saw “strong performance” in 2Q22 with sales growth of 20%. Ferrari’s net order intake reached a new record level. LVMH saw “remarkable performance” for Louis Vuitton, Christian Dior, Fendi, Celine and Loewe. Our verdict: there’s still a lot of wealth going after luxury goods. Follow us on Instagram for more bite-sized investment insights you’ll enjoy reading.