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United States

News Feed

1. Consumer prices rose 0.4% in September, more than expected

2. US electric-vehicle sales hit record high, Tesla loses market share – report

3. Dollar holds on to gains after firm US inflation; focus turns to China data

4. Housing remains a puzzle in Fed’s inflation fight

5. US proposes $270,000 fine for joint venture GM battery plant

Hong Kong

News Feed

1. Exclusive: Mainland Chinese banned from opening new offshore trading accounts with local brokers

2. China state fund buys bank shares, fuelling market rescue hopes

3. Rule curbing AI chip exports to China under final review

4. Beijing tells China’s poor that help is coming, as leaders order wider social security net amid rising economic toll

5. China’s discovery of never-before-seen ore could propel battery technology

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Oversea-Chinese Banking Corp Ltd (OCBC SP): Keeping wealth under lock and key

• BUY Entry 12.85 – Target – 13.40 Stop Loss – 12.58
• Oversea-Chinese Banking Corporation Limited offers a comprehensive range of financial services. The Company’s services include deposit-taking, corporate, enterprise and personal lending, international trade financing, investment banking, private banking, treasury, stockbroking, insurance, credit cards, cash management, asset management and other financial and related services.
• New feature coming soon. OCBC, DBS, and UOB are introducing a new security feature to lock up customers savings in response to scams in Singapore. OCBC will launch this “money lock” feature on their Digital app by the end of November. It allows customers to ringfence a portion of their account balances to prevent digital transfers. To unlock the funds, a cross-channel authorisation process is required, typically through OCBC ATMs. This feature aims to empower customers to secure their funds, reducing the risk of falling victim to scams while maintaining the convenience of digital banking.
• Benefit from high rates being maintained. With interest rates expected to stay higher for longer, local banks such as OCBC will benefit from it as they will be able to earn higher interest margins. These interest margins are driven even higher by the continuous increase in capital through the inflow of foreign investments. This expectation of a high interest rate environment to stay is also supported by the recent increase in the Singapore government bond yield. Hence, we believe that OCBC will stand to benefit from the high-interest rates over the longer duration.
• Growing wealth. As Singapore continues to attract a growing number of wealthy individuals, the country’s banks are expected to receive a boost in assets and deposits. According to Knight Frank, Asia’s rapid ascent as a major contributor to global wealth generation is driven by a thriving middle class and innovative entrepreneurs. Singapore, at the epicenter of this wealth surge, has witnessed a flourishing real estate market and a remarkable 47% increase in inbound foreign direct investment (FDI) compared to 2019 levels. This robust growth narrative sees Asia outpacing the rest of the world, projected to be responsible for nearly 70% of global expansion this year, as stated by the International Monetary Fund. HSBC’s forecast that Asia’s wealth, excluding Japan, could surpass that of the United States by 2025 further underscores this region’s impressive trajectory, supported by per capita income growth.

Knight Frank overall city performances for new wealth hubs:

(Source: Knight Frank – Rise of The Super Wealth Hub Series)

• Continued expansion in China. OCBC Private Bank plans to expand its workforce in China despite the country’s economic slowdown. The bank’s CEO, Jason Moo, remains optimistic about the wealth potential in China, and the bank is actively hiring relationship managers in its core hubs of Singapore, Hong Kong, and Dubai. The goal is to grow the relationship-manager headcount to 500 by the end of 2025. OCBC is also targeting a 20% increase in assets under management, aiming for around $145 billion. While the economic slowdown in China is acknowledged, OCBC sees it as a cyclical phase rather than a structural issue. The bank believes there is still significant potential to attract clients with ample wealth from rivals. Additionally, mega-cities like Beijing and Shanghai are expected to experience substantial growth in the number of millionaires in the coming years, making China an attractive market for private banking. By expanding its presence and hiring more relationship managers in China, OCBC’s wealth segment can tap into China’s vast wealth potential, gain a competitive edge, and position itself for long-term growth in the Chinese wealth management market.
• Enabled QR payments in China. OCBC recently announced that it teamed up with Ant Group, the operator of Alipay, to allow its Singapore customers to make QR code payments in China using the OCBC Digital app. This partnership aims to simplify payments for tourists in China, where QR code payments through Alipay or WeChat Pay are widely accepted, while foreign credit cards often incur unfavorable exchange rates. OCBC’s integration of Ant’s Alipay+ cross-border payment solutions will facilitate payments directly from OCBC customers’ Singapore bank accounts to various China merchants in the Alipay+ ecosystem. This move aligns with OCBC’s broader strategy to enhance its presence in the Chinese market and offers competitive exchange rates for users, particularly with the Asian Games in Hangzhou on the horizon. Ant Group’s Alipay+ is extending support to multiple foreign payment services in China, filling a crucial gap in cross-border payments, giving it a competitive edge over the other local banks.
• Dividend yield. OCBC’s FY23F/24F dividend yield is 6.13%/6.29%.
• 1H23 results review. PATMI jumped by 38.5% YoY to S$3.59bn. Net interest income surged by 47.6% YoY to S$4.73bn.

PBT by segment

(Source: Company)

• Market consensus.

OCBC share price and USD/SGD comparison

(Source: Bloomberg)

(Source: Bloomberg)

Singapore Airlines Ltd. (SIA SP): Expecting a seasonal rebound

• RE-ITERATE BUY Entry 6.50 – Target – 6.90 Stop Loss – 6.30
• The Singapore Airlines Group has over 20 subsidiaries, covering a range of airline-related services, from cargo to engine overhaul. Its subsidiaries also include SIA Engineering Company, Scoot, Tiger Airways, Singapore Flying College and Tradewinds Tours and Travel. Principal activities of the Group consist of air transportation, engineering services and other airline-related activities.
• Still more room for visitor arrivals recovery. In September, there were 1.13mn visitor arrivals to Singapore, which is still far below the pre-COVID level, compared to 1.69mn visitors in January 2020. This represents around 66.8% of visitor arrivals compared with pre-pandemic levels, hence showing a lot of room for upsides. The average monthly visitor arrivals in 2019 was above 1.5mn. Therefore, the normalisation of tourist visits is still on track.

Visitor arrivals trend

(Source: Singapore Tourism Analytics Network)

• To ride on the positive seasonality. The upcoming winter vacation (November to February) is on of the peak travelling season within a year. The recent 8-days holiday in China sparked a travel boom in China, showcasing the recovery of travel demand from China, especially with China recent’s re-opening a few months back. This pent-up demand for travelling is expected to continue for over the winter vacation as people seeks refuge from the winter cold or vice versa. Travel demand is also expected to be higher as the year reaches the end and working adults look for ways to clear their leaves as more borders re-open. Singapore is expected to see more visitors from China as well as around the world, as Singapore is a sweet spot of overseas traveling for families.
• Year end promo fares. Many flight operators including Singapore Airline has started promotional fares for the upcoming peak travelling season to entice consumers to travel abroad with their airline, so as to capture the heightened demand of travelling. With prices starting as low as $168, this is bound to attract consumers to travel during the upcoming travel season.

Jet fuel price trend

(Source: IATA, S&P Global)

• 1Q24 results. Revenue increased by 14.0% YoY to S$4.48bn in 1Q24, compared to S$3.93bn in 1Q23, continued strength in travel demand drives record load factors. Net profit rose to S$734mn, increasing by 98.4% YoY, compared to S$370mn in 1Q24.
• Market consensus.

(Source: Bloomberg)

Ganfeng Lithium Group Co. Ltd. (1772 HK): Riding on China’s dominance in the EV Battery market

• BUY Entry – 33.0 Target – 36.0 Stop Loss – 31.5
• Ganfeng Lithium Group Co Ltd, formerly Ganfeng Lithium Co Ltd, is a China-based company principally engaged in the production and sales of lithium and lithium battery products. The Company is involved in lithium resource exploitation, lithium salt processing, metallic lithium smelting, lithium battery manufacturing and recycling. The Company’s main products include lithium compounds, metallic lithium and lithium batteries. The Company’s products are widely used in electric vehicles, aeronautics, functional materials, pharmaceutical manufacturing, and other fields. The Company distributes its products in the domestic market and to overseas markets.
• Continuing demand for EVs in China. China’s electric vehicle (EV) market, which already makes up 60% of the global market, is expected to continue growing rapidly in the fourth quarter of 2023, due to new car models and discounts offered by automakers. The upcoming end-of-year period also expects major EV players to reach new monthly delivery records, in line with the country’s target with the EV industry achieving a lofty full-year growth target of 8.5 million EVs.
• China leading the EV-battery market globally. Chinese battery makers are gaining more market share in the US and Europe, thanks to their lower prices, which is strengthening their global dominance. China’s CATL holds a global market share of 37%, with BYD in 2nd place with a global market share of 16%. The high demand of EV batteries amidst the strong demand for EVs is likely to continue to drive sales for Ganfeng Lithium Group.

China Lithium Carbonate Prices

(Source: Bloomberg)

• 1H23 results. Revenue rose to RMB18.1bn, up 26.5% YoY, compared to RMB14.3bn in 1H22. Net profit for the period fell to RMB5.87bn in 1H23, down 20.1% YoY, compared to RMB7.35bn in 1H22. Basic EPS was RMB2.92 in 1H23, compared to RMB3.60 in 1H22.
• Market Consensus.

(Source: Bloomberg)

Yankuang Energy Group Co. Ltd. (1171 HK): Winter is coming

• RE-ITERATE BUY Entry – 14.0 Target – 15.2 Stop Loss – 13.4
• Yankuang Energy Group Co Ltd is a China-based international comprehensive energy company engaged in coal and coal chemical industry. The Company operates in five segments. The Coal Mining segment is engaged in underground and open-cut mining, preparation and sale of coal and potash mineral exploration. The Smart Logistics segment provides railway transportation services. The Electricity and Heating Supply segment provides electricity and related heat supply services. The Equipment Manufacturing segment is engaged in the manufacture of comprehensive coal mining and excavating equipment. The Chemical Products segment is engaged in the production and sale of chemical products. The coal products mainly include thermal coal, pulverized coal injection (PCI), and coking coal. The coal chemical products mainly include methanol, ethylene glycol, acetic acid, ethyl acetate and crude liquid wax, among others. The Company distributes products in the domestic market and to overseas markets.
• China’s high demand for coal continues to drive coal output. As the continued drought in China severely reduced hydroelectric power in the southern provinces, the country has increased its reliance on coal-fired power generation. The upcoming winter season is likely to drive the demand for electricity up, and as a result, driving up the demand for coal as well. China’s coal output in August also increased by 2% YoY to 380mn tonnes in August compared to 2022. The growth in production was 1.9pp higher than that in July, signalling a modest rebound after safety measures had restricted mining operations the previous month.
• Coal prices rebounding. Coal prices on the global market have risen to their highest level in 5 months, driven by a surge in activity at Chinese coal-fired power plants, as Chinese power plants burn more coal to make up for the shortage of hydroelectricity caused by the drought. The Russio-Ukrainian war entering the 2nd year of cold snap has also contributed to bringing coal prices up to high since May 2023. Coal mining companies such as Yankuang Energy Group is likely to benefit from this surge in coal prices.

China Qinhuangdao thermal port coal 5,500 GAR spot price

(Source: Bloomberg)

• Yancoal’s improving operational efficiency. Yancoal Australia, a subsidiary of Yankuang Energy Group, recently announced that they have entered into a partnership with TPG Telecom to deploy a private mobile network at its Hunter Valley mines. This is set to bolster Yancoal’s ability to track and communicate with vehicles, equipment, and personnel across the site, increasing the efficiency of the mines, and hence increasing production levels.
• 1H23 results. Revenue fell to RMB84.4bn, down 15.8% YoY, compared to RMB100.3bn in 1H22. Net profit attributable to shareholders fell to RMB10.2bn in 1H23, down 43.4% YoY, compared to RMB18.0bn in 1H22. Basic EPS was RMB2.09 in 1H23, compared to RMB3.70 in 1H22.
• Market Consensus.

(Source: Bloomberg)

Palantir Technologies Inc (PLTR US): War time

• BUY Entry – 17.5 Target – 20 Stop Loss – 16
• Palantir Technologies Inc develops software to analyse information. The Company offers solutions support many kinds of data including structured, unstructured, relational, temporal, and geospatial. Palantir Technologies serves customers worldwide.
• War time again. The Israel-Palestine war began after Hamas assaulted Israel unexpectedly on 7 October, and Israel conducted military retaliation thereafter. As Israel’s ally, the US government announced that it supported Israel. Arms and ammunition were sent to Israel immediately. The defense sector benefited from the war sentiment again since the Russian invasion early 2022.
• The US Department of Defence is the main client. Recently, the company was awarded a contract by the US Army to provide artificial intelligence and machine learning capabilities in support of combatant commands, armed services, intelligence community, and special forces. The contract size is up to US$250mn.
• Ontrack to win a £480mn contract. Previously, Bloomberg reported that the company was on track to win a 5-year contract to overhaul the UK’s National Health Service. The contract size was estimated to be £480mn.
• 2Q23 results. Revenue rose 12.8% year-over-year to US$533.32mn, in line with estimate. Non-GAAP EPS of $0.05 in line with expectations. The number of U.S. commercial customers count increased 35% YoY, from 119 customers in 2Q22 to 161 customers in 2Q23.
• Market consensus.

(Source: Bloomberg)

Coinbase Global Inc (COIN US): Bull run could have begun

• RE-ITERATE BUY Entry – 75 Target – 87 Stop Loss – 69
• Coinbase Global, Inc. provides financial solutions. The Company offers platform to buy and sell cryptocurrencies. Coinbase Global serves clients worldwide.
• Major Payment Institution licence obtained. Coinbase Singapore obtained a Major Payment Institution license from the Monetary Authority of Singapore, allowing the exchange to expand its digital payment token services to individuals and institutions in Singapore.
• Bitcoin reclaimed US$28,000. After consolidating at round US$26,000, Bitcoin price edged up and ranged bound between US$27,000 and US$28,000. Bitcoin is halved every 4 years, and the next halving date is April 25 2024. Bitcoin halving leads to a slow-down in mining output. In other words, the supply of Bitcoin after the halving date will be less. Based on the previously two halvings, Bitcoin experienced bull cycles for 18 months (Previous two halving dates: July 9 2016 and May 11 2020). Historically, Bitcoin’s upward momentum started 6 months before the halving date. Therefore, the Bitcoin upcycle could have started currently.

Bitcoin Halving

(Source: Bloomberg)

• Priced in one more rate hike expectation. The current sell-off in growth/risky assets is attributable to prolonged high rate expectations. Given a robust labour market in the US and sticky inflation, the Fed is expected to hike another 25bps by the end of 2023. Meanwhile, the US 10-year government yield reanched near 4.9%, a high since 2007. However, the plunge in oil prices and the soft consumer spending mitigated the inflation pressure. Peak rate expectations remain, and risky assets are expected to rebound in the near term.
• 2Q23 results. Revenue rose to US$707.9mn, down 12.4% YoY, beating expectations by US$70.1mn. GAAP EPS beat estimates by US$0.36 at -US$0.42.
• Market consensus.

(Source: Bloomberg)

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Trading Dashboard Update: Add Yankuang Energy Group (1171 HK) at HK$14.0.

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