Top Stock Market Highlights of the Week: US Federal Reserve, Keppel Corporation and Southeast Asian Gross Merchandise Value

Here are this week’s top stock market highlights.

US Federal Reserve

Investors breathed a sigh of relief when the US Federal Reserve (“Fed”) declared that interest rates will stay stagnant at its latest meeting.

Prior to the Fed’s announcement, interest rates had been hiked 10 times in a row without a pause, bringing the rate to the current range of between 5% and 5.25%.

That said, Fed chairman Jerome Powell has warned that more rate increases are on the horizon and are “necessary”.

Holding rates steady at this month’s meeting was simply a move to slow the speed at which interest rates rose, but is by no means an indication that no further hikes were needed.

The US central bank will digest incoming economic data before deciding on its next move, but most policymakers see at least two more quarter-point increases before the end of 2023.

However, Powell faced questioning from the US Congress over the moves to continuously raise interest rates over fears that they will lead to a loss of jobs.

The Fed is working to reduce the inflation rate and bring it down to the target of 2%, with current inflation hovering at around double that level.

For now, investors will be left guessing how many more rate hikes will be necessary to tame inflation and how soon these hikes will be imposed.

But what is clear is that rate cuts are not “happening any time soon” until inflation reaches the Fed’s target level.

Keppel Corporation Limited (SGX: BN4)

Keppel Corporation announced that it had been awarded a contract to design, build, own and operate a large-scale district cooling system (DCS) in Jurong Lake District (JLD).

The blue-chip global asset manager and operator with expertise in infrastructure, real estate, and connectivity expect this contract to generate a total value of S$950 million for the group over three decades.

The DCS will supply chilled water to around 1.4 million square metres of gross floor area and can serve future developments in the JLD including offices, business parks, and residential estates.

Because of superior technology and operating know-how, Keppel’s DCS can achieve efficiency levels that are 30% higher than conventional systems and garner cost savings of an equivalent percentage.

The new plant will also help to reduce carbon emissions by 145,000 tonnes over 30 years compared to the industry benchmark, the equivalent of planting nearly 100,000 trees.

JLD is planned by the Urban Redevelopment Authority to be the largest business district outside of the current Central Business District.

The JLD, Jurong Innovation District and Tuas Port will together serve as testbeds for new urban solutions and infrastructure and result in a more pleasant living environment.

Southeast Asian gross merchandise value

Bloomberg Intelligence (BI) is bullish on e-commerce growth for the Southeast Asian (SEA) region.

An industry analyst for technology in BI estimates that gross merchandise value (GMV) may grow 15% per annum between 2022 and 2030.

Large electronic retailers, however, may see the proliferation of social media platforms such as Facebook and Instagram, part of Meta Platforms’ (NASDAQ: META) slew of brands, along with TikTok, that may grab market share.

However, the online grocery industry is also set to expand by 17% per year over the same period to hit US$180 billion, according to consultancy firm Bain.

This news should bode well for e-commerce players in the region including Grab (NASDAQ: GRAB), GoTo (IDX: GOTO), and Sea Limited (NYSE: SE).

There is more good news for Grab and GoTo as SEA’s ride-hailing GMV may grow 25% per year from 2022 to 2030 to hit US$30 billion, with the former slated to retain at least 70% of this total.

However, AirAsia is now seeking to enter the ride-hailing space and may capture some of this market share from the two incumbents.

The same analyst also expects Sea Limited to achieve a quicker full-year breakeven compared with Grab and GoTo.

Grab had just shed 1,000 jobs in a widely-anticipated layoff exercise to streamline its cost base.

But with GMV for e-commerce and ride-hailing set to increase, the pie will get larger for all players in the coming years, giving them ample opportunities to grow and expand their presence.

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Disclosure: Royston Yang owns shares of Meta Platforms.

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