On Christmas Eve of 2018, the Dow Jones Industrial Average (DJIA) and S&P 500 Indexes recorded their worst pre-Christmas trading day ever. The DJIA fell over 653 points or 2.91%, while the S&P 500 fell by 65.52 points, or 2.71%. This was right after the Dow experienced its worst week since 2008 when the Dow fell by nearly 7%.
When the United States (U.S.) markets reopened after Christmas, U.S. equities registered a huge turnaround, with the DJIA, S&P 500 and Nasdaq soaring by nearly 5%, each registering their largest one-day percentage gains since 2009. The DJIA climbed over 1000 points, its highest one-day point gain on record. Overall, all three indexes closed higher this week, their first weekly gain since late November.
This turbulent week had an effect locally on the Straits Times Index (STI), which opened lower on Wednesday and rose on Thursday. As 40% of SGX listings are foreign firms, one of the sectors that may be affected is the Capital Markets industry.
On this week’s edition of Four Stocks This Week, we will look at four firms in the Capital Markets industry listed on the SGX.
Global Investments Limited (SGX: B73)
Global Investments Limited (GIL) is a mutual fund managed by Singapore Consortium Investment Management Limited. GIL invests in different asset classes across numerous industries in the public equity and fixed income markets around the world.
In November 2018, GIL released its Q3 2018 financial results, where it posted an income of $7.8 million, 3.7% lower compared to Q3 2017. Nevertheless, GIL reported that net profit rose by 14.5% year-on-year (YOY) to $6.3 million, driven by lower expenses from the absence of an incentive fee.
As of 30 September 2018, GIL’s Net Asset Value (NAV) was $329.41 million. By asset class, GIL’s largest investments included Bank Contingent Convertibles (CoCos) at 33.0%, Chinese Domestic Bonds at 16.9% and Listed Equities at 16.7% of NAV respectively. Amongst its Bank CoCos portfolio, GIL has the greatest exposure to France, which amounted to 25.5%.
For NAV by currency, the three main currencies include the U.S. Dollar, Chinese Renminbi and Singapore Dollar, which accounts for 33.0%, 21.2% and 16.3% of NAV respectively.
GIL rose $0.003 or 2.8% on Friday (28 December 2018), closing at $0.109 per share and a market cap of $187.9 million. Year-to-date (YTD) 2018, GIL shares have fallen by 25.9%.
Hotung Investment Holdings Limited (SGX: BLS)
Hotung Investment Holdings Limited is a venture capital investment group incorporated in Bermuda. Its core business interests are concentrated in Taiwan, China and Silicon Valley.
According to Hotung’s 2017 Annual Report, Hotung’s has invested most heavily in the Material, Biotechnology and Traditional Industry sectors, which account for 27.4%, 15.2% and 13.3% of its invested amount respectively. By geographic area, Taiwan accounts for 60.8% of Hotung’s total investment, while China and the U.S. stand at 27.6% and 3.1% respectively.
In November, Hotung released its Q3 2018 financial statement, revealing an 8% decline in revenue YOY to NT$146.2 million ($6.52 million). While dividend and distribution income rose 27% to NT$63.8 million ($2.84 million), net gains on financial assets were significantly lower than gains on sale and fair value changes in Q3 2017, resulting in the dip in revenue. Overall, net profit after tax fell by 2% to NT$96.3 million ($4.29 million).
On 18 December, one of Hotung’s investee companies Fusheng Precision Co Ltd (TPE: 6670), was listed on the Taiwan Stock Exchange. Fusheng Precision is the world’s biggest golf club head contract manufacturer and commands a market share above 40%. Fusheng Precision is trading at NT$159.50 as of 28 December 2018, below its first-day closing price.
Moving forward, Hotung says higher interest rates and the risk of further escalations in the U.S. -China trade war, which will hurt both Taiwan’s and China’s electronics industries, are factors which could affect Hotung over the next twelve months.
Hotung shares fell by $0.01 or 0.6% this week on the 28 December 2018, closing at $1.62 and a market cap of $155.9 million this week. Shares of Hotung shares are lower by 18.6% YTD 2018.
Singapore Exchange Limited (SGX: S68)
Singapore Exchange Limited (SGX) operates an integrated securities exchange and derivatives exchange in Singapore and related clearing houses. As of November 2018, SGX hosts a total of 739 listed companies, which have a combined total market capitalisation value of $949.1 billion.
In October, SGX released its quarterly report for the period ending 30 September 2018, where it recorded a 2% rise in operating revenue to $208.9 million. This was driven by stronger performance in its Derivatives business, which saw a 21% jump in revenue.
For Derivatives, SGX reported an 11% increase in Equity and Commodities revenues, driven by higher volumes in the SGX FTSE China A50 futures which was attributed to higher volatility in the underlying market. On the other hand, collateral management income grew 48%, due to higher demand for risk management services.
This surge in revenue more than offset revenue declines in SGX’s Equities and Fixed Income (E&FI) and Market Data and Connectivity (MD&C) divisions. However, due to a similar rise in staff costs and technology expenses, SGX reported a quarterly net profit of $91 million, which was flat YOY.
It closed this week on 28 December 2018 at $7.12, which marked a share price decline of 4.7% YTD 2018.
UOB-Kay Hian Holdings Limited (SGX: U10)
UOB-Kay Hian Holdings Limited is a brokerage firm with offices in Southeast Asia, China, the United Kingdom and North America. United Overseas Bank (UOB) Limited currently owns a 38.87% stake in UOB Kay-Hian.
In November, UOB-Kay Hian released its Q3 2018 financial results, reporting that its income fell by 7% YOY to $85.3 million. This was driven by a sharp decline in its commission income by 17.2% to $52.1 million, which more than offset an 11.8% rise in interest income to $25.0 million.
Overall, net profit after tax fell by a smaller magnitude of 2.3% to $18.0 million, helped by a significant fall in operating expenses and income tax expense, such as a $1.9 million provision being written back following a favourable legal outcome for its Thai subsidiary.
UOB-Kay Hian mentioned that the U.S.-China trade tensions have hurt regional markets, resulting in weaker trading volumes. It remains cautious about the business prospects for the rest of the financial year.
UOB-Kay Hian shares traded at a price of $1.18 on Friday this week, a decline of 13.2% YTD 2018.
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