OPEC throws a surprise: Weekly recap and what to watch in the week ahead

This week, OPEC unexpectedly announced that it will be reducing oil production, causing a sharp spike in oil prices. 

The higher oil prices has led to concerns that inflation will persist and the Fed will find it harder to lower interest rates in the coming months. It could also raise the odds of a recession. 

It is no wonder that investors are flocking to safe assets, leading to a fall in government bond yields.  

If you're looking for a sector that typically benefits from lower bond yields, it might be worthwhile considering the REITs. 

We share our guide on what to look for when selecting a REIT. Also, as investors are often less familiar with REITs that have overseas assets, we speak to the CEO of Cromwell European REIT and compare the three Singapore REITs with 100% European assets. 

If our weekly update has helped you to better navigate the past quarter, do sign up to receive our newsletter regularly in your mailbox.

🛢 OPEC throws a surprise

What happened? 

Saudi Arabia and other OPEC+ oil producers announced oil production cuts of around 1 million barrels per day.

What does this mean?

The surprise move will bring total announced production cuts this year to 3.66 million barrels per day, representing about 3.7% of global demand. 

This caused a sharp spike in oil prices to above US$80 per barrel. The US government said that it does not think the cuts are “advisable at this moment given market uncertainty”. 

Why should I care? 

Lower energy prices in recent months have led to expectations that inflation will start to ease. 

However, the latest move by OPEC could drive sustainably higher prices, causing central banks to keep interest rates higher for longer.

This could also raise the odds of a recession. 

🚗 WHAT'S MOVING

• Tesla announced that it delivered 422,875 vehicles in 1Q23, below market expectations of 432,000 vehicles.
• China EV sales rebounded in March compared to the previous month for BYD, Li Auto and Xpeng, However, Nio’s March sales fell vs the prior month.
• Samsung Electronics announced that it is cutting memory chip production after reporting its slimmest profit since the 2009 financial crisis. This is seen as a significant step toward ending excess supply that has led to lower prices across the industry.
• Singtel will pay $236 million to take up a share issuance by its Indonesian associate Telkomsel, which will be merging with the broadband unit of Telkom. Upon completion of the deal, Singtel’s stake in the enlarged entity will be 29.6%, compared to its current stake of 35% in Telkomsel.

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

💡 THE BIG IMPORTANT STORY

Complete guide to Singapore REITs: How to choose the best REIT

 Our step-by-step guide to helping you get started with investing in Singapore real estate investment trusts (REITs).

🤓 WHAT WE’RE LOOKING OUT FOR THIS WEEK

• Wednesday, 12 April: US CPI 
• Thursday, 13 April: Singapore 6-month T-bill auction
• Friday, 14 April: Singapore MAS April 2023 Monetary Policy Statement, JP Morgan, Citigroup, Blackrock earnings

Source: Bloomberg, SGX 

🍭 THAT’S INTERESTING

The number of billionaires in Singapore increased to 35 from 26 last year, according to the Forbes 2023 World's Billionaires List. These billionaires have a combined net worth of US$118.9 billion (S$157.9 billion). The richest person in Singapore remains Li Xiting, the co-founder and chairman of Shenzhen Mindray Bio-Medical Electronics. There were three new entrants to the billionaire list, including Raffles Medical Group co-founder Loo Choon Yong. 

Source: Straits Times, ChannelNewsAsia