The Straits Times Index rose 72 points week-on-week to end at 3,280 on Sept 15. The upmove takes the STI above the confluence of its 50-, 100- and 200-day moving averages at 3,243, 3,232 and 3,256 respectively, This area posed some resistance initially as the index retreated from this area during Sept 7-13.
In the past two sessions, on Sept 14-15, smoothed RSI moved above its equilibrium line, as did quarterly momentum, providing the STI with some impetus. Resistance says as at the Sept 6 intra-day high of 3,345. Any further upmove remains hostage to global headwinds.
The upmove of Sept 14-15 was initially underpinned by the banks, but has broadened to include the local developers.
Among them Frasers Property (FPL) rose 5.6%. On Sept 14, The Edge Singapore had a story that indicated that FPL was one of the most undervalued developers on the SGX.
On Sept 15, DBS Group Research says FPL’s share price has been weak of late and the stock now trades at 0.3x P/B, one of the lowest amongst developers in Singapore, which trade between 0.4-0.7x P/B (average of 0.6x). At its current share price and market cap of $3.1 billion, the market is ascribing zero value for FPL’s role as a sponsor.
“We estimate that FPL’s strategic stakes in its listed REITs, based on current share prices of Frasers Centrepoint Trust (FCT), Frasers Logistics & Commercial Trusts (FLT), Frasers Hospitality Trust (FHT), Frasers Property Thailand Industrial Freehold & Leasehold REIT (FTREIT), Golden Venture REIT (GVREIT) is worth $2.9 billion, which is close to FPL’s market cap. The market is ignoring the value that FPL brings as a sponsor of its listed REITs and its exposure to the fast-growing industrial and hospitality businesses, spanning Australia, Europe and parts of Asia,” DBS adds.
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The major drawback of investing in FPL is its illiquidity. TCC Group and Thai Beverage hold 88% of the shares outstanding.
Globally, though, US risk-free rates as represented by yields on the 10-year US treasuries is at 4.31% as at Sept 15 after moving to a high of 4.35%, the highest levels this year.
Bank of Singapore (BoS) says August’s US consumer price index (CPI) data was mixed. Although headline inflation rose more than expected from 3.2% to 3.7% owing to a rebound in energy prices, core inflation eased from 4.7% to 4.3%.
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“We think the Federal Reserve will look through the jump in energy costs and focus on the moderating pace of core inflation. Though core prices rose 0.3% in August due to volatile airfares and persistent rents, healthcare and car insurance costs, there has been a clear step down in the pace of monthly core CPI increases over the summer,” BoS says.
BoS believes the Fed is likely leave its fed funds rate unchanged this month at 5.25-5.50%. A decision is due on Sept 20. August’s payrolls and CPI show rate hikes are slowing employment and inflation.
“The Fed’s likely rate pause should ease pressure on bonds after 10-year Treasury yields made new highs at 4.35%,” BoS says.
