Top Stock Market Highlights of the Week: US Core Inflation, OCBC, Singapore Airlines and Sembcorp Industries

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

US core inflation

There is more good news for investors who are closely monitoring the inflation numbers coming out of the US.

Consumer prices for October remain unchanged from their level in September with a drop in oil prices dragging down headline inflation.

Meanwhile, core inflation slowed further to its lowest since September 2021.

The consumer price index (CPI) rose 3.2% year on year in October, lower than the 3.7% annual increase in September.

Core inflation rose 4% year on year, lower than economists’ forecast of a 4.1% year-on-year increase.

The data triggered a sharp rally in US stock markets as treasury yields fell across the board.

Investors were now feeling optimistic that the US Federal Reserve will keep interest rates unchanged during its December meeting.

However, inflation remains stubbornly above the central bank’s target of 2%, implying that officials there may still agree to hike interest rates.

OCBC Ltd (SGX: O39)

OCBC’s Indonesian subsidiary, PT Bank OCBC NISP Tbk, will buy Commonwealth Bank of Australia’s (ASX: CBA) 99% stake in its Indonesian subsidiary, PT Bank Commonwealth (PTBC).

The unit of OCBC will fork out around A$220 million for the purchase which will be fully funded through its internal cash reserves.

OCBC Indonesia is also looking to acquire the remaining 1% of PTBC from the rest of the minority shareholders.

This acquisition is the first for OCBC since United Overseas Bank (SGX: U11) announced the acquisition of Citigroup’s (NYSE: C) consumer banking business in four countries and DBS Group’s (SGX: D05) acquisition of Citigroup’s Taiwan consumer banking business.

However, at A$220 million, OCBC’s transaction is considered minor compared with the billion-dollar acquisitions carried out by its peers.

The completion of the purchase, however, is subject to regulatory approvals from the Monetary Authority of Singapore and the Indonesia Financial Services Authority.

If approved, the acquisition is slated to be completed in the second or third quarter of 2024.

OCBC believes the purchase will add scale to its Indonesian franchise and increase its presence in the country.

PTBC has over 1.2 million customers with total assets of A$1.8 billion as of 30 June 2023.

With little overlap in customer relationships between OCBC Indonesia and PTBC, this acquisition should create synergies and help to increase the blue-chip bank’s customer base.

Singapore Airlines Limited (SGX: C6L)

Singapore Airlines Limited, or SIA, has signed another deal to expand its network of destinations.

The flagship carrier added Philippine Airlines as another regional partner to allow SIA to codeshare on flights to and from Manila to 27 destinations in the Philippines.

The new agreement will start this quarter and enable Philippine Airlines to codeshare on SIA flights to the European cities of Paris, Rome, Frankfurt, Copenhagen, Zurich, and Milan.

A codeshare agreement allows airlines to sell seats on each other’s flights while splitting the revenue.

Such arrangements also offer passengers more travel options, making it a win-win for both airlines.

Both SIA and Philippine Airlines are exploring the expansion of this codeshare agreement to include more destinations in the future.

Meanwhile, SIA already has a similar partnership with Malaysia Airlines and is looking to sign agreements with Garuda Indonesia, Thai Airways International, and Vietnam Airlines JSC.

If the airline can sign codeshare agreements with these players, it will greatly expand the range of destinations it can offer to its customers and will increase the attractiveness of its offerings.

Sembcorp Industries Ltd (SGX: U96)

Sembcorp Industries Ltd, or SCI, has signed an agreement to acquire majority interests of between 73% to 100% in subsidiaries of Gelex Group Joint Stock Company.

Through this series of transactions, SCI will add 245 MW of operational renewable wind, solar, and hydropower assets to its Vietnamese portfolio while expanding the renewables portfolio within the country to over 450 MW.

Upon completion, the utility group’s gross renewables capacity will total 12.2 GW.

This transaction is in line with SCI’s objective to grow its renewables portfolio to 25 GW by 2028 which it communicated during its recent Investor Day 2023.

The maximum equity consideration is around S$218 million and will be funded via a mix of internal cash flow and debt.

These assets are also underpinned by long-term power purchase agreements contracted with state-owned enterprise Vietnam Electricity.

Completion is expected in the first half of 2024.

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Disclosure: Royston Yang owns shares of DBS Group.

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