(June 3): June 7 will mark the end of Theresa May’s tenure as British Prime Minister, after a three-year leadership fraught with bad mistakes, resignations, controversy and widely panned policies. Her time as PM will be defined by her inability to deliver Brexit. Even as she broke down in tears after her farewell speech outside Downing Street, there is little sympathy for the “Maybot”.
May will remain caretaker PM until a successor is chosen from among Tory leaders in a party poll expected to be held in July, which means she will be the one greeting US President Donald Trump in his state visit between June 3 and 5.
Trump, whose prior visits elicited mass protests, is visiting the UK for the second time since he took office. His visit is likely to be closely watched, as he seeks to strengthen alliances amid increasing tensions with China. Trade ties strained significantly when the US banned American companies from doing business with Huawei Technologies. In reaction to these multipronged attacks, Beijing signalled that it may retaliate by restricting exports of rare-earth elements, a key component in the making of electronics.
As a result, financial markets around the world have sold off sharply. Wall Street recorded steep losses on May 29 as the Dow Jones Industrial Average slumped to the lowest level in almost four months, losing 221 points to trade at 25,126. The Standard & Poor’s 500 index also fell to a two-month low, sliding 19 points to 2,783. The yield on the benchmark 10-year Treasury note also fell to a 19-month low on May 28 as Wall Street grew more certain that the US-China trade war would last longer and afflict GDP growth more than first thought. It was lower at 2.264% as at May 28, off a 19-month low earlier in the session, while the 30-year Treasury bond yield traded at 2.705%, off its lowest level since 2017.
Conversely, however, the Global Investor Confidence Index increased to 79.5, up 6.6 points from April’s revised reading of 72.9, a contrast to the ongoing geopolitical instability. “The trade war and Brexit-related uncertainty dominated this month’s headlines. Institutional investors have been wary, and with potential supply-chain disruptions and concerns about rising protectionism, it is understandable that sentiment remains anchored in the risk-averse territory,” says Kenneth Froot, co-developer of the index. “However, while the low level of the index points to risk-off behaviour over the last few months, the solid uptick this month indicates that some investors may be moving back in to buy the dip.”
Singapore on currency watch list
On May 29, the US Treasury added Singapore, Malaysia and Vietnam to a watch list for exchange rate and macroeconomic policy. According to the US Treasury, Singapore made the list because of its large current account surplus and net foreign currency purchases of at least US$17 billion ($23.48 billion) in 2018 — equivalent to 4.6% of GDP.
The Monetary Authority of Singapore (MAS) has said, however, that it does not manipulate its currency for export advantage, in response to media queries. The central bank argued that Singapore’s current account balance should be viewed in context.
“In its early years of development, Singapore ran persistently large current account deficits averaging close to 10% of GDP between 1965 and 1984, when its investment needs were greater than available savings,” MAS says. “As the economy matured, its investment needs tapered off, while national savings rose. Consequently, the current account turned into a surplus position.”
The Straits Times Index dipped 0.64% on May 30 to close at 3,143 points, following a downtrend for the month. It has steadily fallen from 3,400.2 points on April 30.
Stocks to watch
Singapore-listed Hong Leong Asia announced on May 29 that it intended to take cement maker Tasek Corp private, in a deal worth an estimated RM128.61 million ($42.87 million.) It is the second takeover involving a cement company in May, after Malaysian conglomerate YTL Corp’s YTL Cement acquired stakes in Lafarge Malaysia for RM1.63 billion, or RM3.75 a share.
In a stock exchange filing on May 29, Tasek said it had received an unconditional voluntary takeover offer from HL Cement (Malaysia) (HLCSB) and Ridge Star — the two subsidiaries that Hong Leong Asia uses to control Tasek — to acquire the remaining shares they do not own in the cement maker.
Tasek said the offer price of RM5.50 a share represented a premium of 8.06% over the company’s five-day volume-weighted average price of RM5.09, up to and including May 27. On May 30, shares in Tasek closed at RM5.51, giving it a market value of RM667.5 million. Hong Leong Asia closed at 52 cents on May 30, up 0.96% for the day.
On May 30, shares in Singapore Telecommunications traded at a high volume of 38.5 million after the group announced that it had completed the subscription of 170.1 million new equity shares in Bharti Airtel at INR220 a share. The aggregate consideration for the shares totalled INR37.4 billion ($738.5 million). As a result, Singtel’s overall shareholding interest in Bharti Airtel has decreased to 35.2% from 39.5%. Shares in Singtel closed 0.63% higher at $3.20 on May 30.
Myanmar-focused Yoma Strategic reported a 4QFY2019 earnings surge to US$25.7 million ($35.5 million) from $400,000 a year ago, on the back of stronger performance of its retail business and a reduction in real-estate reliance in its portfolio of businesses. The 4Q financials bring FY2019 earnings to US$34.1 million, from $11.9 million a year ago. Yoma Strategic closed flat at 33 cents on May 30.
Yoma-affiliated Memories Group also posted earnings of US$6.1 million ($8.4 million) in 4QFY2019, up from US$1 million a year ago, owing to a one-off US$8 million gain from its acquisition of SM Assets Holdings. It brought the group’s full-year earnings to US$2.3 million for FY2019 ended March, reversing a loss of US$6.2 million in FY2018.
Meanwhile, Nam Cheong, a Malaysia-based builder of offshore support vessels, announced that its subsidiary, SKOSV, had clinched long-term chartering contracts for three OSVs worth RM80 million with Malaysian oil majors. In a May 29 filing, the group said its latest contract wins reinforced its strategy to grow its vessel chartering segment. It also marks a boost to the poorly performing offshore and marine industry in Singapore. Nam Cheong shares closed at 0.8 cent on May 30, down 11.11%.
Coming week
With the first-quarter earnings reporting season behind us, investors will be looking at broader economic indicators for a better pulse on the market. On June 3, Singapore will announce its Purchasing Managers’ Index for May and the US, its manufacturing PMI.
