Top Stock Market Highlights of the Week: Singapore’s Inflation, US Federal Reserve, Sembcorp Industries and City Developments Limited
Welcome to the latest edition of top stock market highlights.
Singapore’s inflation rate
Singapore’s core inflation rate for February has not budged from the 5.5% logged in January this year.
This level of inflation remains the highest since November 2008 but was still lower than the 5.8% forecast by a Reuter’s poll of economists.
Services inflation declined month on month but the drop was offset by higher inflation for retail, electricity, and gas.
The good news is that overall inflation came in at 6.3%, down 0.3 percentage points from the 6.6% reported in January.
The outlook has not changed much for the rest of 2023.
Core inflation should remain high for the first quarter of this year and stay elevated through the first half before easing somewhat.
Overall and core inflation for this year is expected to average between 5.5% to 6.5% and between 3.5% to 4.5%, respectively.
If the effects of the GST hike are excluded, the rate then drops to between 4.5% to 5.5% and between 2.5% to 3.5%.
The US Federal Reserve
The US Federal Reserve has gone ahead to raise its benchmark interest rate by another 0.25 percentage points.
This increase comes even as the central bank frets over a growing bank crisis in the US due to the failure of Silicon Valley Bank and Signature Bank.
The federal funds rate now has a new range of between 4.75% to 5%, the highest since October 2007.
Borrowers in Singapore and heavily-indebted businesses should soon expect interest rates here to head up as well.
There is some respite, though.
The US Federal Reserve is preparing to cease its interest rate hike cycle and has not mentioned “ongoing rate increases” any longer.
This shift should come as a relief to a wide swath of businesses and REITs that had to shoulder the burden of higher finance costs over the past year.
Despite the change in tone, peak interest rates are still poised to rise further to probably around the 5% to 5.25% range as originally projected in December last year.
None of the officials within the central bank anticipated a reduction in interest rates this year as the US continues to battle stubbornly-high inflation rates.
Sembcorp Industries Ltd (SGX: U96)
Sembcorp Industries Ltd, or SCI, is mulling the sale of its waste management unit, SembWaste, according to people with knowledge of this matter.
The group is working with a financial adviser on the potential sale of the division and is looking to raise around US$700 million from its divestment.
Other investment firms within the industry are purportedly interested in the deal, though negotiations are still ongoing and SCI may decide not to proceed.
SembWaste provides waste management, public cleaning, and recycling services and had, in 2020, bought over Veolia Environment’s Singapore environmental services arm and public cleaning business for around S$28 million.
If this deal goes through, it will raise more cash for SCI to continue to pursue the strategic objectives of upping its return on equity and growing its sustainable solutions portfolio which it outlined during its 2021 Investor Day.
City Developments Limited (SGX: C09)
City Developments Limited, or CDL, has agreed to acquire Sofitel Brisbane Central from Brookfield Asset Management, a unit of Brookfield Corporation (NYSE: BN), for A$177.7 million.
Sofitel Brisbane Central has 416 rooms and is a five-star luxury hotel offering superb connectivity to the city’s commercial and retail regions.
This purchase will help the property giant to expand its hospitality footprint in Australia and will be its third hotel there.
The hotel also has six restaurants and bars along with a ballroom and eight meeting rooms.
CDL will have an effective group interest of 87.9% in the property as the transaction was conducted through its wholly-owned subsidiary Millennium & Copthorne Hotels Limited in a 50:50 joint venture with its New Zealand-listed subsidiary Millennium & Copthorne Hotels New Zealand (NZX: MCK).
The hotel has a land tenure of 99 years from 25 May 2021 along with facilities such as a heated outdoor pool, spa, hair salon, medical clinic, and underground parking for 220 vehicles.
This acquisition is expected to be completed by the second half of this year.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
