STI Declines 1.1% At Open, Greek Referendum Bombshell Lingers On
The Straits Times Index (STI) opened down 1.1%, declining 30.21 points to 2,759.14. This followed a 2.3% fall yesterday, which was set off after Greece’s Prime Minister Geogre Papandreou announced that he would put the nation’s bailout plan to a referendum. Markets across the global, already weighed by bankruptcy of US broker MF Global and unexpected growth moderation in China’s manufacturing sector, were shocked by the bombshell. In Asia, the Nikkei-225 and Hang Seng shed 1.7% and 2.5% respectively. On both sides of the Atlantic, markets similarly tumbled with the Germany’s Dax plunging 5% and the United States’ S&P 500 slumping 2.8%.
Significance: If indeed the Greek bailout plan were put to a referendum, it is unlikely to garner support from the disgruntled population which see little hope of reprieval amidst high unemployment and relentless austerity cuts. This turn of event has prompted French President Nicolas Sarkozy and German Chancellor Angela Merkel to soon hold an emergency meeting with Greece, to push for a quick implementation of the agreed bailout deal.
Singapore’s Manufacturing Continues Decline, Electronics Post Growth Surprise
According to the Singapore Institute of Purchasing & Materials Management, manufacturing sector of the Republic contracted in October for the fourth consecutive month. The Purchasing Manager’s Index (PMI) came in at 49.5 points, edging up from 48.3 points in September, and was close to the key 50-point level that marks an expansion. The contraction in manufacturing activities was due to fewer new orders and new export orders. The electronics sector, however, posted a surprise growth with its PMI jumped to 52.1 points from 47.2 points – boosted by new orders from overseas and domestic markets – recording its first growth in three months.
Significance: The turnaround in electronics may prove hard to sustain as the developed economies see no near-term resolution to their woes. Already, Asian export powerhouses such as China, Taiwan and South Korea had reported slowing manufacturing activities. In particular, China’s official PMI dropped to 50.4 points to register its lowest level since Feb-09.
Jardine C&C’s 3Q11 Profit Jumps 28.3%
Jardine Cycle & Carriage (C&C) posted a 28.3% profit jump for the third quarter ended 30 Sep-11, rising to US$289.6 million from US$225.7 million. Of this, its Indonesia-listed conglomerate Astra contributed 96.2% or US$278.5 million, representing a 27.8% growth compared to 3Q10’s US$217.8 million. The remaining US$15.8 million came from its other motor interests in Indonesia, Malaysia, Singapore and Vietnam. Revenue for the quarter rose 34.8% to US$5.4 billion from US$4 billion. For the nine-month period, top and bottom line increased 30% to US$14.9 billion and 32.6% to US$774.8 million respectively, while earnings per share improved to 217.82 US cents from 164.24 US cents.
Significance: Notwithstanding the uncertainties from a deteriorating global economy, Jardine C&C remains positive of its outlook for the rest of the year. Alongside the earnings results, changes to its board were announced. Following the retirement of Anthony Nightingale on 31 Mar-12, Ben Keswick will step down as group managing director and succeed as new chairman. David Alexander Newbigging, the current chief executive of Jardine Engineering Corporation, will take on the role as group managing director.
CMT Falls On Private Placement News
CapitaMall Trust (CMT), Singapore’s largest real estate investment trust, saw its shares fell 5.3% yesterday after its private placement announcement. The trust will place out 139.7 million new units at $1.79 apiece to over thirty existing and new institutional investors from Asia, Europe and the United States. Gross proceeds of about $250 million is expected to be raised, providing ‘greater financial capability to ramp up organic growth through asset enhancement initiatives’. According to Simon Ho, chief executive of CMT’s manager, ‘These initiatives – which include those already announced for JCube, The Atrium@Orchard and Iluma – are expected to boost CMT’s net property income for the next few years.’
Significance: The fall in CMT’s shares represents dilution concerns from existing shareholders. Nevertheless, analysts have affirmed the positives of the private placement. In particular, CIMB issued an ‘outperform’ call and noted that the move will strengthen balance sheet while ‘quash near-term cash-call concerns as well as giving it the flexibility to drive growth through asset enhancement initiatives.’