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First Resources (FR SP): Palm oil prices at a two-year high

• RE-ITERATE BUY Entry – 1.48 Target– 1.60 Stop Loss – 1.42
• First Resources Limited produces crude palm oil. The Company is an upstream operator with primary business activities in the cultivation and harvesting of oil palms, and the processing of fresh fruit bunches into crude palm oil for local and export sales.
• Palm oil prices surged to a two-year high. Palm oil prices have surged for three consecutive days, reaching a two-year high due to strong demand and tightening supply. October exports from Malaysia, the world’s second-largest palm oil producer, rose 11%, driven by increased shipments to India, China, and the EU. Higher crude oil prices also boosted palm oil’s demand as a biofuel feedstock. Additional demand is expected from Indonesia’s plan to raise palm oil use in biofuel next year. Supply challenges, partly due to aging palm trees, have driven palm oil prices up over 30% this year. Experts anticipate the rally may continue into the first quarter of 2025, supported by seasonal consumption, limited supply, and biodiesel demand. This price increase benefits palm oil producers such as First Resources.

Crude Palm Oil Price

(Source: Bloomberg)

• Thailand bans exports of palm oil. Thailand’s Department of Internal Trade has imposed a temporary ban on raw palm oil exports due to reduced production from drought and plant diseases, intending to stabilize local prices and maintain sufficient stock. The ban, expected to last until December, aims to shield consumers and farmers from price spikes. With crude palm oil stocks over 200,000 tonnes, industry associations have agreed to halt exports and keep prices stable until January 2025. Retailers and wholesalers have also pledged to maintain reasonable bottled palm oil prices, with potential penalties for violators, including fines or prison time. This ban will result in reduced palm oil supplies, which will continue to bolster prices.
• 1H24 results review. Total revenue for 1H24 increased by 1.9% YoY to US$457.2mn from US$448.8mn, primarily due to the higher production volumes as compared to the same period last year, partially offset by a reduction in purchases of palm oil products from third parties for processing and sale. Net profit was US$103.9mn in 1H24, an increase of 45.4% YoY and profit from operations rose by 48.9% YoY to US$143.5mn, driven by higher production volumes and improved processing margins. Basic EPS rose in 1H24 to 6.67 UScents from 4.56 UScents in 1H23.
• Market Consensus.

(Source: Bloomberg)

Yanlord Land Group Ltd (YLLG SP): China’s stimulus to boost value

• RE-ITERATE BUY Entry – 0.680 Target– 0.760 Stop Loss – 0.640
• Yanlord Land Group Ltd is a real estate development company. The Company develops high-end residential property projects in the Peoples Republic of China.
• Signs of recovery in the property market. China’s property market is showing signs of recovery, with transaction volumes in major cities surging due to recent measures aimed at boosting demand and restoring confidence. In October, Shanghai’s secondary market recorded over 20,000 transactions—a month-on-month increase of 52.3%, according to data from the Shanghai Real Estate Trading Centre. Similarly, Beijing saw 11,699 pre-owned home sales from October 1 to 24. This uptick in transactions across top cities suggests a broader rebound in China’s property market. The recovery is supported by various government measures, including lower down payment and mortgage rates, an expanded “white list” to provide liquidity support for developers, and relaxed home purchase restrictions in key cities. This renewed momentum in China’s property market stands to benefit companies like Yanlord Land Group, which is well-positioned to capitalize on the improving market dynamics.
• Liquidity buffers for developers. The Ministry of Finance reiterated recently that the central government has room to increase fiscal deficit. The key policies shown are expected to ease property and construction companies’ liquidity issues.
  • Allocate 400 billion yuan (US$56.57 billion) from the local government debt balance limit to expand local financial resources.
  • Tap funding from an unused bond quota of 2.3 trillion yuan (US$325.3 billion) for local governments.
  • Introduce a one-time, large-scale debt ceiling increase for local governments to swap their hidden debts.
  • Allow local governments to use special bonds to purchase idle land from troubled developers.
  • Use special bonds to purchase existing commercial homes. Earmark more for offering government-subsidised homes, and less on building new homes.
  • Optimise tax policies and study the abolition of value-added tax on ordinary residential buildings.
• Monetary policy tool to support capital market. China’s central bank announced the establishment of the Securities, Funds, and Insurance Companies Swap Facility (SFISF), with an initial scale of 500 billion yuan, aimed at promoting the healthy and stable development of the capital market. This marks China’s first monetary policy tool designed to support the capital market. The SFISF will allow eligible securities, funds, and insurance companies to use their assets, such as bonds, stock ETFs, and holdings in CSI 300 Index constituents, as collateral to obtain highly liquid assets like treasury bonds and central bank bills, according to a statement by the People’s Bank of China. The facility’s scale could be expanded based on market conditions. For China State Construction International Holdings (CSCIH), this provides access to highly liquid assets, strengthening its liquidity position and enhancing its ability to manage cash flow and finance operations. Additionally, the SFISF is expected to mitigate herd behavior and other pro-cyclical actions in the capital market, fostering a more stable and predictable environment for CSCIH to operate in.
• 1H24 results review. Total revenue for 1H24 increased by 34.8% YoY to RMB19.953bn from RMB14.805bn in 1H23. Income from property development, property investment and hotel operations, and property management for 1H24 increased by 42.4%, 1.9% and 0.4% to RMB17.488bn, RMB894mn and RMB591mn, respectively, while income from other segment decreased by 7.2% to RMB980mn, compared to 1H23. The Group reported a loss for the period of RMB421mn and a loss attributable to the owners of the Company of RMB486mn in 1H24, mainly due to write-down of completed properties for sale and properties under development for sale and net impairment losses on financial assets.
• Market Consensus.

(Source: Bloomberg)

Hong Kong Exchanges and Clearing Ltd. (388 HK): China has the trump cards

• BUY Entry – 326 Target 376 Stop Loss – 301
• Hong Kong Exchanges and Clearing Limited is principally engaged in the operation of stock exchanges. The Company operates through five business segments. The Cash segment includes various equity products traded on the Cash Market platforms, the Shanghai Stock Exchange and the Shenzhen Stock Exchange. The Equity and Financial Derivatives segment includes derivatives products traded on Hong Kong Futures Exchange Limited (HKFE) and the Stock Exchange of Hong Kong Limited (SEHK) and other related activities. The Commodities segment includes the operations of the London Metal Exchange (LME). The Clearing segment includes the operations of various clearing houses, such as Hong Kong Securities Clearing Company Limited, the SEHK Options Clearing House Limited, HKFE Clearing Corporation Limited, over the counter (OTC) Clearing Hong Kong Limited and LME Clear Limited. The Platform and Infrastructure segment provides users with access to the platform and infrastructure of the Company.
• Expectations of upcoming China policies. From 4^th November through 8^th November, the Standing Committee of the National People’s Congress (NPC), China’s top legislative body, will convene in Beijing to address a broad agenda of issues. A substantial fiscal stimulus package—strongly advocated by prominent economists and highly anticipated by investors—will likely be a key topic. Investors expect that Beijing may unveil details of fiscal support on Friday, 8^th November. Recently, Finance Minister Lan Foan also indicated that China plans to “significantly increase” government debt to support consumers and the struggling property sector. Additionally, reports suggest that China is considering authorizing over RMB10tn (US$1.4tn) in new debt issuance next week. This move would aim to address hidden local debt, finance the repurchase of idle land, and reduce the large inventory of unsold properties. Decisions on these measures are anticipated by the close of this week’s meeting. Reports indicating that the NPC is set to meet market expectations suggest that liquidity and volatility on the Hong Kong Stock Exchange (HKEX) may see a notable increase following the policy announcements on November 8.
• Harris catching up. The current U.S. presidential elections remain heated, with the probability of Kamala Harris and Donald Trump winning being neck to neck, according to Bloomberg. From estimates by ABCnews, Kamala Harris has a slight edge over Trump in winning the U.S. presidential election, with a probability of 48.0% for winning the presidential election, 1.2 pp ahead of Donald Trump, who currently has a 46.8% chance of winning the U.S. presidential election. The trade and export restriction policies under Harris’s administration are more predictable. China-US relations are expected to remain status quo, leaving room for China to recover its economy.

U.S. Presidential Election Estimate (Blue: Harris, Red: Trump)

(Source: Bloomberg)

• Expanding presence. HKEX recently announced plans to open an office in Riyadh in 2025, enhancing its presence in the Middle East. This office will serve as a strategic hub, strengthening HKEX’s connectivity with the Gulf region and fostering opportunities for both customers and issuers. Located in Saudi Arabia’s financial center, the Riyadh office will allow HKEX to engage directly with investors and companies in one of the world’s most dynamic economies, supporting their access to Hong Kong’s financial product ecosystem. This expansion is expected to boost trading volume and liquidity on HKEX over the long term.
• 3Q24 earnings. The company’s revenue rose to HK$5.37bn in 3Q24, +5.7% YoY, compared to HK$5.08bn in 3Q23. The company’s profit attributable to shareholders rose by 6.5% YoY to HK$3.15bn in 3Q24, compared to HK$2.95bn in 3Q23. Basic earnings per share rose to HK$2.49 in 3Q24, compared to HK$2.33 in 3Q23.
• Market consensus.

(Source: Bloomberg)

China Hongqiao Group Ltd. (1378 HK): Rallying aluminium prices

• RE-ITERATE BUY Entry – 12.70 Target 14.10 Stop Loss – 12.00
• China Hongqiao Group Ltd is a company principally engaged in the manufacturing and sales of aluminum products. Its primary products include molten aluminum alloy, aluminum alloy ingots, aluminum busbars and aluminum alloy processing products. It operates principally in the People’s Republic of China (the PRC), Hong Kong, and overseas countries, including the British Virgin Island (BVI), Indonesia and Cayman Island. The Company is also engaged in the bauxite trading, financial leasing and environmental protection and inspection businesses through its subsidiaries.
• Rallying Aluminium Price. Aluminum prices have been on a steady rise since early August, increasing from around US$2,250 per metric ton to the current level of approximately US$2,600 per metric ton, nearing their May peak. This upward trend is largely driven by global supply chain disruptions, escalating raw material costs, and higher operational expenses. Additionally, recent economic stimulus measures in China aimed at boosting demand are further contributing to heightened demand and supporting aluminum prices. This price increase is expected to benefit China Hongqiao Group.

Aluminum Spot Price

(Source: Bloomberg)

• Expectations of higher EV demand driving aluminium demand. According to Bloomberg, China’s leading EV manufacturers closed 3Q24 on a high note, with robust delivery numbers reducing the pressure to offer discounts. Despite intense price competition and escalating trade tensions with Europe, China’s EV market is set to remain the world’s strongest as 2024 nears its end. The market currently anticipates a surge in EV sales for 4Q24, driven by expanded subsidies that have fueled stock gains and led to Tesla’s best quarter in China. Furthermore, in September, EVs and hybrids comprised approximately 53% of new car sales in China, underscoring their growing market share. This expected rise in EV demand is also likely to drive up aluminum demand, potentially pushing prices even higher.
• Strong Aluminium output to cater to demand. China’s aluminum production rose in September compared to the previous year, supported by steady demand and sustained profitability for producers, according to official data. The country produced 3.65 million metric tons of primary aluminum in September, marking a 1.2% year-over-year increase, as reported by the National Bureau of Statistics. Daily output in September averaged 121,667 tons, slightly up from August’s 120,322-ton daily average. This production growth aligns with strong demand across the transportation, construction, and packaging sectors, bolstered by rapid consumption from the solar and renewable power industries, which has helped counterbalance weaker demand from the property sector.
• 1H24 earnings. The company’s revenue rose to RMB73.6bn in 1H24, +12.0% YoY, compared to RMB65.7bn in 1H23. The company’s net profit rose by 272.7% YoY to RMB9.15bn in 1H24, compared to RMB2.46bn in 1H23. Basic earnings per share rose to RMB0.966 in 1H24, compared to RMB0.259 in 1H23.
• Market consensus.

(Source: Bloomberg)

Spotify Technology SA (SPOT US): A leader maintains its competitive edge

• RE-ITERATE BUY Entry – 380 Target – 420 Stop Loss – 360
• Spotify Technology S.A. and its subsidiaries provide audio streaming subscription services worldwide. It operates through two business segments: paid subscriptions and ad-supported.
• Leading music streaming platform. As of the second quarter of 2024, Spotify maintained its position as the top music streaming platform, with a record 625mn monthly active users (MAUs). This includes an all-time high of 393mn ad-supported users and 246mn paying subscribers. With an estimated global music streaming user base of 713mn, Spotify holds a leading 31.7% market share. Average revenue per user (ARPU) was €4.62 in Q2, close to its historical peak of €4.63.
• Podcast growth driven by audience shifts. The expansion of Spotify’s podcast audience reflects a shift in media consumption, as public trust in traditional media declines. A Washington Post commentary highlighted distrust in mainstream media, with a notable drop of 200,000 subscribers. In contrast, alternative media like podcasts are gaining traction—Donald Trump’s recent appearance on Joe Rogan’s show garnered 26mn views and listens within 24 hours, underscoring the popularity of podcasts. Spotify’s podcast offerings have grown to 250,000 videos by Q2 2024, from 100,000 at the end of 2023, with over 170mn users engaging with its video podcasts.
• Leveraging artificial intelligence. Spotify has integrated artificial intelligence to enhance user experience, providing personalized music, podcasts, and playlists. In 2023, the company introduced AI-driven voice translation for podcasts, boosting engagement and user retention. This advanced AI model strengthens Spotify’s competitive edge and enhances user loyalty.
• 2Q24 results. Revenue increased 20.2% YoY to €$3.81bn. Basic earnings were €137mn compared to a loss of €155mn in the same period last year. The company expects third-quarter revenue of €400mn and a total of 639mn monthly active users.
• Market consensus.

(Source: Bloomberg)

DoorDash (DASH US): Leading food delivery platform

• RE-ITERATE BUY Entry – 154 Target – 174 Stop Loss – 144
• DoorDash, Inc. provides restaurant food delivery services. The Company develops technology to connect customers with merchants through an on-demand food delivery application. DoorDash serves customers in the United States.
• America’s leading food delivery platform. According to Bloomberg, as of May this year, DoorDsah ranks first in the U.S. food delivery platform market in terms of ross merchandise volume (GMV), with a share of approximately 67%. Since the COVID-19 epidemic, food delivery services have grown rapidly, with YoY growth of approximately 8% in the first half of this year.
• DashPass Membership Services. DoorDash provides DashPass membership service. Subscribers can enjoy free shipping and discount services, thereby increasing usage frequency and user loyalty. The company has been expanding its DashPass partners beyond just restaurants, including Lyft, NBA/WNBA and Chase Bank.
• Expand delivery services. DoorDash has gradually expanded its business scope, not only limited to catering, but also including grocery delivery, alcohol delivery, etc., to further meet the diverse needs of users.
• 3Q24 results. Revenue increased 25% YoY to US$2.7bn, exceeding expectations by US$50mn. GAAP earnings per share were $0.38. Total order volume increased by 18% YoY to 643mn; Gross order value (GOV) increased by 19% YoY to US$20bn. The company expects 4Q24 GOV of $20.6bn to $21.0bn.
• Market consensus.

(Source: Bloomberg)

Trump-themed Trades

With less than a week until the 2024 U.S. election, the latest polls show Trump maintaining a lead over Harris, increasing the likelihood of his comeback to the presidency. His well-known slogan, “Make America Great Again,” reflects the core of his platform, often described as advocating for isolationist policies. Should Trump assume office once again, his administration’s impact on global economics and geopolitics could be profound and unpredictable. While there are both pros and cons, here are several Trump-themed ideas worth considering:

1. Economic Reshoring – Trump has consistently pushed for bringing manufacturing jobs back to the U.S., aiming to reduce dependency on foreign markets. This could boost domestic employment and economic resilience, though it may strain trade relationships.
2. Trade Policy – Known for prioritizing “America First,” Trump may increase tariffs and negotiate stricter trade agreements, potentially reshaping international commerce but also risking retaliatory measures from other countries.
3. Immigration and Border Security – Trump has pledged to complete the U.S.-Mexico border wall, strengthening border security to curb illegal immigration and what he describes as the flow of drugs and crime across borders. Policies under a Trump administration would likely include stricter visa restrictions, aggressive deportation of undocumented immigrants, and limits on asylum, positioning immigration as a key national security issue.
4. Military and Security – Trump’s approach could see increased defense spending and a reassessment of U.S. involvement in foreign conflicts. While this may bolster national security, it could create tensions with allied countries that rely on U.S. support.
5. Energy Independence – Advocating for domestic energy production, Trump’s policies might drive a renewed focus on fossil fuels and reduced regulation on U.S. energy sectors. This could benefit local economies but raise concerns around environmental impact and climate commitments.
6. Social Policy and Education – Advocating for free speech on campuses and in public institutions, Trump is likely to target what he sees as “cancel culture” and censorship, especially in social media and mainstream media. Trump’s education policy includes promoting school choice, cutting federal control over education, and banning critical race theory from public education.
7. Cryptocurrencies – Trump used to be sceptical about cryptocurrencies, however, he repositioned himself as a pro-crypto presidential candidate in June this year. He declared that he wanted the U.S. to become the “crypto capital of the planet” and the Bitcoin “superpower of the world”. Trump’s crypto venture, World Liberty Financial, has launched its native token in October, and it plans to launch its own stablecoin, which is designed to peg 1 to 1 to the value of the USD.
8. Healthcare – Rather than supporting expanded government-funded healthcare, Trump advocates for market-driven healthcare reforms, which may include expanding health savings accounts, lowering prescription drug costs, and promoting private healthcare options.

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Trading Dashboard Update: Take profit on CSC Financial Co Ltd (6066 HK) at HK$10.6. Add China Hong Qiao Group Ltd (1378 HK) at HK$12.70 and Spotify Technology SA (SPOT US) at US$380. Cut loss on Fortress Minerals Ltd (FMIL SP) at S$0.255.