Top Stock Market Highlights of the Week: US Federal Reserve, Sea Limited and HDB Resale Prices

Welcome to the latest edition of top stock market highlights.

US Federal Reserve

The latest observation from the chairman of the US Federal Reserve has made investors worried.

Jerome Powell had just this week cautioned that interest rates are likely to move higher than what the central bank policymakers had originally projected.

He cited recent data on inflation which showed that the prices of goods and services had shot up 6.4% in January, more than the 6.2% that economists had anticipated.

Powell’s remarks also had two implications – that interest rates would rise faster than expected, and that the terminal interest rate (i.e. the peak level at which the central bank will no longer raise rates) may also be higher than previously indicated.

Back in December last year, consensus had expected the terminal rate to hit 5.1% but after Powell’s remarks, this expectation had now shifted to a range of 5.5% to 5.75%.

At the upcoming Federal Open Market Committee meeting from March 21 to 22, many observers also expect a 0.5 percentage point increase.

This news will hit borrowers hard as interest rates look poised to rise further, inflicting even more pain on highly-indebted individuals and businesses.

Investors also worry that these higher rates will increase the probability of a punishing recession as demand for goods and services falls off a cliff and businesses start shedding jobs as they hold back from expanding.

Sea Limited (NYSE: SE)

Sea Limited turned in a surprise profit for its fiscal 2022’s fourth quarter (4Q 2022) as the e-commerce outfit took drastic steps to rein in costs.

CEO Forrest Li remarked that the company has started 2023 on a “much stronger footing” as it pivots from growth at all costs to focus on efficiency and profitability.

His remarks echoed what Mark Zuckerberg of Meta Platforms (NASDAQ: META) had told analysts of the company entering a “Year of Efficiency”.

Total revenue rose 7% year on year to US$3.5 billion for 4Q 2022.

Cost of sales dipped from US$1.9 billion to US$1.7 billion over the same period while sales and marketing expenses fell sharply by 61.2% year on year to US$473.6 million.

The e-commerce firm booked its first-ever net profit of US$422.8 million for 4Q 2022, a sharp reversal from the net loss of US$616.3 million registered a year ago.

Digging deeper into its business segments, all three of Sea Limited’s divisions posted year on year revenue increases.

The E-commerce division saw revenue jump 31.8% year on year to US$2.1 billion, of which marketplace revenue was US$1.8 billion.

Gross orders, however, fell by 12% year on year to 1.7 billion, with gross merchandise value dipping by 1% year on year to US$18 billion for the quarter.

Sea Limited’s digital entertainment division reported a 6.3% year on year rise in revenue to US$948.9 million for 4Q 2022.

Quarterly active users, however, continued their downward trend.

The company registered 485.5 million users for 4Q 2022, down 14.6% quarter on quarter and 25.8% year on year.

A bright spot was Sea Limited’s digital financial services division, which reported a 92.5% year on year surge in revenue to US$380.2 million.

HDB resale prices

The increase in HDB resale prices has finally come to a halt after rising without fail for 31 consecutive months.

Demand for these flats has stayed high as construction had temporarily halted during the pandemic, despite the cooling measures that the government had imposed at the end of September 2022.

But this trend may reverse by the end of this year as an increased supply of around 26,000 to 28,000 build-to-order (BTO) flat units flow through.

Many applicants are turning to the resale market as they do not wish to risk their first-time priority ballot status or have their first-time privilege suspended.

Prices of resale flats had dipped marginally by just 0.1% month on month in February, leading analysts to caution that this decline may either be seasonal or just temporary.

On a year-on-year basis, however, prices were still up 8.3% for February.

Flash data from real estate portals 99.co and SRX also showed that fewer resale HDB flats changed hands during the month, with sales volume falling by 28.2% year on year to 1,849 units.

More BTO flats with a shorter waiting time of under three years will also be launched from 2024 onwards, hopefully putting downward pressure on resale HDB flat prices as demand cools.

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Disclosure: Royston Yang owns shares of Meta Platforms.

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