IB Traders’ Insight

View The Latest Videos View Videos

1 2 3 4 5 2 1437


Stocks

Singapore Exchange - Taking Stock of Singapore's Recent Manufacturing Growth


  • Singapore's Manufacturing sector grew by a robust 10.2% YoY in 2Q18, extending the 10.8% YoY growth in 1Q18 and 10.1% YoY expansion in 2017.  Manufacturing has been a keen driver of Singapore's GDP growth which has been on trending higher since the end of 2015. 
  • ST Engineering, Yangzijiang Shipbuilding, Venture Corp, Sembcorp Marine and Haw Par Corp are amongst Singapore's five biggest manufacturing plays excluding F&B manufacturing. Since the end of 2015, the five stocks have averaged a 51% total return. 
  • The five stocks have also recently reported their 2QFY18 and 1HFY18 earnings, with four stocks reporting net profit growth. These four stocks averaged 2QFY18 net profit growth of 40% YoY and 1HFY18 net profit growth of 35% YoY.      

Broadening of Manufacturing Growth 
 
On 13 August the Ministry of Trade and Industry ("MTI") reported that in 2Q18 Singapore's manufacturing sector grew by a robust 10.2% year-on-year ("YoY"). This extends from the 10.8% YoY growth in1Q18. As noted in the report (click here) all clusters within the sector expanded in 2Q18, with the electronics, biomedical manufacturing and transport engineering clusters contributing the most growth.
 
For 2017 MTI reported that the manufacturing sector expanded by 10.1%, accelerating from the 3.7% growth in 2016. However in 2017, the growth was less broad and largely driven by the electronics and precision engineering clusters - with the biomedical manufacturing, transport engineering and general manufacturing clusters contracting.
 
Quarterly GDP growth has been on a steady uptrend in Singapore since a 1.3% YoY GDP growth rate was reported for the December 2015 quarter.
 
As noted in the aforementioned report, Singapore's 2Q18 GDP growth rate was 3.9% YoY. 
 
Five Largest Manufacturing Plays (Excl. F&B) average 51% Gains Since End of 2015 
 
Singapore Technology Engineering, Venture Corporation, Yangzijiang Shipbuilding, Sembcorp Marine and Haw Par Corporation represent the five largest capitalised manufacturing plays excluding F&B manufacturing listed on SGX. Combined, the five stocks maintain a market capitalisation of S$26.1 billion.
 
Four of the five stocks have their headquarters in Singapore. The exception is Yangzijiang Shipbuilding which produces a broad range of commercial vessels such as containerships, bulk carriers and LNG vessels, with its shipbuilding bases strategically located along the Yangtze River.
 
Since the end of the December 2015 quarter, the five stocks have averaged a 50.7% total return. However in the year thus far the five stocks were not immune to the broader declines of the region and have averaged a 3.6% decline in total return, with mixed performance ranging from a 23.4% decline for Yangzijiang Shipbuilding Holdings to a 20.7% total return for Haw Par Corporation.  
 
All five stocks have reported their 2QFY18 (ended 30 June) and 1HFY18 earnings, with four of the five stocks - Singapore Technology Engineering, Venture Corporation, Yangzijiang Shipbuilding and Haw Par Corporation reporting net profit growth. These four stocks averaged 2QFY18 net profit growth of 40% YoY and 1HFY18 net profit growth of 35% YoY.      
 
Of these stocks, Haw Par Corporation reported the strongest growth in Net Profits for both 2QFY18 and 1HFY18 and generated the strongest year-to-date total returns of the group at 20.7%.

 

Source: Bloomberg and SGX StockFacts as of 16 August 2018

 

Whilst Sembcorp Marine reported a 1HFY18 operating loss of S$33 million in 1HFY18, the Group reported revenue of S$2.81 billion for 1HFY18 which compared to S$1.39 billion in revenue generated in 1HFY17, which was restated for accounting changes on adoption of SFRS (I). The higher revenue in 1HFY18 was largely due to revenue recognition on delivery of four jack-up rigs to Borr Drilling, one jack-up rig to BOTL, sale of the West Rigel semi-submersible rig (West Rigel) and higher percentage recognition for ongoing drillship and offshore production projects in 1HFY18.

 
Did You Know?
 
According to MTI Research, in Singapore manufacturing can also generate positive spillovers for distribution, transportation and financing industries. Based on an MTI study (click here) a S$10 million increase in manufacturing demand would lead to S$810,000 in non-manufacturing output and between six and seven non-manufacturing jobs. 

--

Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Singapore Exchange and is being posted with Singapore Exchange’s permission. The views expressed in this material are solely those of the author and/or Singapore Exchange and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


19840




Macro

Interactive Brokers - Investors Brace for Potential Adverse Impact on Oil Prices and Related Risky Assets


Energy-related riskier assets are likely to undergo a bout of near-term volatility, as oil prices respond to planned U.S. sanctions against purchases of Iranian crude, as well as ongoing global trade disputes.

Analysts have been generally outlining various geopolitical scenarios, as the financial markets brace for a potential significant shift in global oil trading.

Strategists at Fitch Solutions, for example, said they think exports will fall by 1.3 million b/d by end-2019, although they acknowledge “major risks” to their view.

Fitch noted that under this scenario, “China maintains imports at around their current volume, while India and Turkey make substantial reductions, in order to qualify for waivers. Europe, Japan and South Korea reduce imports to low or near-zero levels. Significantly, this assumes that most buyers outside of China will opt for compliance with the U.S.”

Fitch continued that the composition of Iranian exports has already begun to shift.

China and India have been increasing their imports, while purchases by Japan have remained broadly flat. Europe and, to a much lesser degree Turkey, have been winding down trade, while South Korea has “aggressively pushed its imports to zero,” Fitch said. “Although crude purchases are not yet sanctionable, buyers in a number of markets - in particular in Western Europe - have faced increasing difficulties in securing shipping and insurance services for their trades. These difficulties will only increase, as the November 5 deadline approaches,” they added.

 

Impact on oil prices

While the cost of crude oil rose somewhat Thursday, the price remained below the US$70 mark at around US$65.45 per barrel. The price of the coveted commodity has fallen nearly 10% since it set a 52-week high of US$72.56 on July 10, and some analysts foresee more pain in the near-term.

Strategists at Asbury Research recently observed the Invesco DB Oil ETF (DBO) declining from three months of investor indecision, while targeting an additional 7% decline, which would turn the major trend downwards. Overall, Asbury Research said crude oil is pointing toward more third quarter weakness. 

Other analysts, however, are more optimistic about the direction of the cost of the commodity, pegging the volatility to geopolitical concerns that have recently showed some signs of improvement.

Blue Line Futures founder Bill Baruch noted positive news on the U.S. and China trade front worked to support price action across commodities on Thursday. He maintains that crude oil is trending higher and Wednesday’s sharp drop was, conversely, a byproduct of the global risk-off sentiment.

Baruch added that all in all, if crude “battles at these levels and can finish the week on a strong note it would be a tremendous signal of its resilience and longer-term bullish trend.”

Crude oil settled down US$0.87 Wednesday at US$64.46.

 

Creditworthiness of certain oil & gas companies improves, despite sector spread-widening

Meanwhile, many corporate bondholders apparently haven’t been very pleased about the recent uncertainties over oil prices, with cash spreads in the investment-grade energy sector wider by around six basis points since August 2 to 154bps more than matched-maturity U.S. government bonds.

However, not all oil and gas-related companies’ debt has been damaged by the fall-out from the recent drop in the cost of crude.

Texas-based Range Resources (RRC), for example, has been shoring-up its liquidity while committing to an accelerated path of deleveraging, which seems to have had a positive effect among its bondholders.

However, RRC’s revenues for the second quarter of 2018 declined 3% year-on-year to US$656m, its net cash from operating activities fell US$100m to US$175m, and the firm incurred an earnings loss of US$80m, or US$0.32 per diluted share from US$70m, or US$0.28 per diluted share in the prior-year quarter. 

RRC mainly blamed its Q2 earnings results on a US$103m derivative loss due to increases in future commodity prices compared to an US$111m derivative gain in the prior year.

Meanwhile, RRC’s stock has risen nearly 16% since it set its 52-week low of US$12.71 in early February, while the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) has shed more than 11.2% since July, when crude oil began to descend from its highs.

Range Resources CEO Jeff Ventura highlighted the firm’s 22% year-on-year lift in cash flow, stemming from its Marcellus operations, “where long laterals and the utilization of existing pads and infrastructure are a tailwind for capital efficiencies.” He added that RRC is also “intently focused on actions to fast-forward the de-levering process swiftly and prudently through asset sales.”

The debt reduction initiative has spurred optimism among some credit analysts about the performance of the company’s bonds.

Gimme Credit analyst Evan Mann recently noted that RRC is “pursuing multiple initiatives to monetize assets and will use the net proceeds to reduce leverage to below 3x. This near-term debt reduction goal represents an acceleration from its previously stated five-year plan which includes reducing leverage below 2x by 2022 without asset sales.”

Mann added he thinks RRC's leverage will decrease to 3.3x in 2018 and 3.1x in 2019, but the company's “actual leverage will likely fall further as we haven't factored in anticipated asset sales.”

RRC’s earliest maturity is in 2021, with those 5.75% notes recently quoted 3bps tighter on the day Thursday at an OAS of a little more than 190bps. The firm’s 5% bonds due August 2022 were last 5bps tighter on the day at just under 265bps.

--

The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


19837




Futures

CME Group - Economist Perspective: 8/16 10-Year T-Note Yield Curve


Blu Putnam, CME Group Chief Economist

 

Bluford “Blu” Putnam has served as Managing Director and Chief Economist of CME Group since May 2011. With more than 35 years of experience in the financial services industry and concentrations in central banking, investment research, and portfolio management, Blu serves as CME Group’s spokesperson on global economic conditions.

Never miss out on daily futures and options trading opportunities - Click here to Subscribe to In FOCUS Newsletter for Active Traders.

Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from CME Group and is being posted with CME Group’s permission. The views expressed in this material are solely those of the author and/or CME Group and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


19835




Forex

Interactive Brokers - Should Investors Be Worried About Turkey?


Steve Sosnick, Interactive Brokers chief options strategist, discusses the concerns investors should have with Turkey.

 

The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

 


19836




Stocks

Interactive Brokers Asset Management - Tesla Drama Belies Revved Up Market Value


Tesla CEO Elon Musk stunned investors when he announced in a tweet that he’s considering taking the publicly traded electric-vehicle maker private.


The company’s stock price has since gyrated on conflicting reports about whether Musk notified his board or has actually lined up financing, as he claimed, for a management-led buyout at $420 a share.

 

 

Musk has also said that the Saudi sovereign wealth fund is a potential backer and that Goldman Sachs (GS) has signed on as an adviser.

 

SEC Calling

Now there are reports that the Security Exchange & Commission has issued a subpoena to Tesla (TSLA) to find out the actual state of play. 

In recent months, Musk has lashed out at Wall Street analysts on earnings calls over criticism about the company’s launch of its mid-priced Model 3 sedan

In justifying his decision to explore taking Tesla private, Musk has argued that the pressure of hitting quarterly earnings targets is detrimental to the company’s long-term future.


Fan Base

Investors, meanwhile, are still willing to give the company a hefty market value.

Back in 2003, the company’s market value was about $2 billion.

Now, at $57 billion, it’s higher than General Motors (GM) and Ford (F) as of August 15.

 

Source: Bespoke Investment Group

 

 

If that’s not impressive enough, consider that Tesla is the 4th most valuable auto company on the planet, according to an analysis by Bespoke Investment Group.  

 

Source: Bespoke Investment Group

 

 

Takeaway

Aside from Tesla, Musk is also the founder, CEO and lead designer at Space Exploration Technologies (SpaceX), making him one of America’s most remarkable entrepreneurs.

He also has his share of critics. Short-sellers have targeted Tesla, betting that its losses and cash pressures will be tough to overcome.

Yet, in my opinion, so far Tesla’s market value has held up well, suggesting most investors continue to be true believers. 

For the moment, Tesla continues to leave GM and Ford in the rear-view mirror when it comes to market capitalization.

--

Xavier Brenner has covered global market, business and economic trends since 2013 for Interactive Brokers Asset Management. As an experienced financial journalist, Brenner offers analysis and insights on the stories that matter to the discerning investor.

This material is not intended as investment advice. IBKR Asset Management or portfolio managers on its marketplace may hold long or short positions in the companies mentioned through stocks, options or other securities.

This material is from Interactive Brokers Asset Management and is being posted with Interactive Brokers Asset Management’s permission. The views expressed in this material are solely those of the author and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


19834




1 2 3 4 5 2 1437

Disclosures

We appreciate your feedback. If you have any questions or comments about IB Traders' Insight please contact ibti@ibkr.com.

The material (including articles and commentary) provided on IB Traders' Insight is offered for informational purposes only. The posted material is NOT a recommendation by Interactive Brokers (IB) that you or your clients should contract for the services of or invest with any of the independent advisors or hedge funds or others who may post on IB Traders' Insight or invest with any advisors or hedge funds. The advisors, hedge funds and other analysts who may post on IB Traders' Insight are independent of IB and IB does not make any representations or warranties concerning the past or future performance of these advisors, hedge funds and others or the accuracy of the information they provide. Interactive Brokers does not conduct a "suitability review" to make sure the trading of any advisor or hedge fund or other party is suitable for you.

Securities or other financial instruments mentioned in the material posted are not suitable for all investors. The material posted does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before making any investment or trade, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice. Past performance is no guarantee of future results.

Any information provided by third parties has been obtained from sources believed to be reliable and accurate; however, IB does not warrant its accuracy and assumes no responsibility for any errors or omissions.

Any information posted by employees of IB or an affiliated company is based upon information that is believed to be reliable. However, neither IB nor its affiliates warrant its completeness, accuracy or adequacy. IB does not make any representations or warranties concerning the past or future performance of any financial instrument. By posting material on IB Traders' Insight, IB is not representing that any particular financial instrument or trading strategy is appropriate for you.