Top Stock Market Highlights of the Week – US Federal Reserve, Sembcorp Industries and Manulife US REIT

Welcome to this week’s edition of top stock market highlights.

US Federal Reserve

For its final meeting in 2023, the US Federal Reserve decided to maintain its benchmark rate in the range of 5.25% to 5.5%, its highest level in 22 years.

This should come as a welcome relief to investors who were worried that the US central bank will continue to raise interest rates to tame inflation.

In addition, officials also signalled that interest rates will be cut by a total of 0.75% in 2024.

This was 0.25 percentage points higher than what the Federal Reserve had communicated back in September when it said that interest rates would be cut by 0.5%.

With each reduction being 0.25%, the latest news implies that there will be three rate cuts next year.

These projections came about because the central bank now expects inflation to fall to 2.4% in 2024, down slightly from its original assessment of 2.5%.

Officials also expect inflation to fall further to 2.2% by 2025.

This meeting marks the third in a row where the central bank has held rates steady.

Also, while leaving room open for further rate hikes should inflation spike again, the wording of the language now suggests that the Federal Reserve is biased against further interest rate increases.

Fed chairman Jerome Powell reiterated that more evidence is still needed to show that inflation was moving towards its 2% goal and that the economy could still surprise next year.

Hence, what the central bank does is still contingent on the macroeconomic data it receives.

He also declined to guide as to when a rate cut may be initiated but acknowledged that inflation has “eased over the past year”, which is a positive sign and a nod to the fact that higher rates had their intended effect.

Sembcorp Industries Ltd (SGX: U96)

Sembcorp Industries Ltd, or SCI, announced that it had been awarded Singapore’s largest solar power project.

The contract involves the solarising of interim vacant land and rooftops of five buildings on Jurong Island with a contracted capacity of 80 MW.

This tender is the largest project by capacity awarded by a public sector agency in Singapore to date.

SCI has been providing sustainability solutions involving energy, water, and waste on Jurong Island for more than 25 years.

A recent development there includes a 285 megawatt-hour energy storage system and an upcoming 600 MW hydrogen-ready power plant that will be operational in 2026.

The blue-chip utility group is well-positioned to support Singapore’s Green Plan 2030 to transform Jurong Island into a sustainable energy and chemicals park.

Elsewhere, SCI also received a letter of award for a 300 MW solar project in India.

Upon completion in 2026, power output will be sold to NHPC Limited, an enterprise of the government of India, under a 25-year long-term power purchase agreement.

This project will lift SCI’s gross renewables capacity globally to 13 GW, including 473 MW of acquisitions pending completion.

Manulife US REIT (SGX: BTOU)

Manulife US REIT, or MUST, has come up with an ambitious recapitalisation plan to help the REIT get back on its feet after a breach in one of its bank covenants caused it to halt distributions.

The good news is that all three resolutions were approved at the recent extraordinary general meeting (EGM) held.

All three resolutions were interdependent and had to be passed together for the recapitalisation plan to go through and for MUST to survive.

Meanwhile, 11 out of 12 of the REIT’s lenders have obtained the necessary approvals to restructure the REIT’s existing loan facilities.

The last lender is pending final board approval.

The overwhelming support from unitholders and lenders means that MUST can implement this plan to enjoy a new lease of life, thus giving the REIT a fighting chance to brave the headwinds in the US office market.

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Disclosure: Royston Yang does not own shares in any of the companies mentioned.

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