Market Commentary Overview
The global market continues to defy expectations with US stocks closing at all-time highs, highlighted by a rising S&P 500, Nasdaq Composite, and a modest yet positive jump in the Dow Jones Industrial Average. In the US, technology, health care, and energy companies have driven gains with investors closely monitoring Federal Reserve minutes that discussed concerns over stubborn inflation and potential economic slowdown. Meanwhile, despite concerns over possible tariffs—with President Trump proposing a 25% duty on imported autos, chips, and pharmaceuticals—the market remains optimistic. Bond yields experienced a dip following the meeting, underscoring the sensitive balance between monetary policy adjustments and market expectations.
Across Europe, stocks wrestled with a notable decline prompted by fears of a less aggressive monetary easing cycle and renewed trade tensions with the US. The Stoxx 600 Index fell following remarks by ECB’s Isabel Schnabel, while the UK’s FTSE 250 took a hit as inflation reached a 10‐month high, fueled by rising food costs, airfares, and new tax measures. In Asia, the MSCI Asia Pacific Index recorded a slight downturn as Japanese automakers – including Toyota and Honda – were pressured by mounting inflation concerns while regional variations persisted with Chinese shares gaining and Hong Kong stocks retreating. Overall, the mixed signals across the global landscape call for a careful balancing act by investors.
Research Ideas & Deep Dive Analysis
China Telecom (728 HK) – Leveraging Growth Opportunities in AI
China Telecom continues to impress by capitalizing on the rising momentum of artificial intelligence. The company’s performance is underscored by its share price dancing to a 30% rise at the end of 2024, outpacing the MSCI China Index considerably. Year-to-date, its share price has rallied by 27% versus 14% by its telco peers. This momentum is driven primarily by the company’s resilient business model, a strong balance sheet, and an attractive dividend yield, making it a quality yield play during uncertain geopolitical times.
The telecommunications giant has taken proactive steps by integrating DeepSeek’s AI model into its service suite, aiming to enhance service offerings and boost operational efficiency. Management also emphasized its leadership in cloud computing and industrial digitalisation (ID) business. Despite a more selective investment approach focusing on high-quality projects rather than rapid expansion, experts remain confident in China Telecom’s ability to harness opportunities spurred by China’s digital economy push. With these strong fundamentals and an upward revision of its fair value estimate from HKD5.80 to HKD7.22, the recommendation stands firmly as BUY.
United Overseas Bank Ltd (UOB SP) – Record Profits and Strategic Returns
UOB concluded FY24 on a high note, recording a healthy 6% rise in net profits to SGD6.0b, or SGD6.2b when excluding one-off items. The bank’s impressive performance was driven by a 7% boost in fee and commission income, underpinned by stronger wealth management fees and a 30% year-on-year improvement in customer-related treasury income. Retail operation expansion in ASEAN, growing credit card fees by 18%, and a 5% growth in loans reflect UOB’s robust business model despite a modest dip in net interest margin from 2.09% to 2.03% in FY24.
In addition to its strong earnings, UOB has announced a generous payout strategy comprising a final dividend of SGD0.92 per share, which, when combined with a special dividend of SGD0.50, brings the full year dividend to SGD1.80 per share. The bank is further bolstering shareholder value with a SGD2b share buyback programme, targeting shares from the open market for cancellation.
Looking ahead, management has reinforced its guidance for FY25 with expectations for high single-digit loan growth, double-digit fee income growth, improved overall income, and a stable cost-to-income ratio. With revised earnings estimates for FY25 and FY26 reflecting fewer expected rate cuts and improved fee performance, the fair value estimate is raised to SGD41.50. However, given the modest upside in comparison to current valuations, the recommendation for UOB remains at HOLD.
Singapore Budget 2025 – Goodies Galore
Singapore’s fiscal approach for FY25 is characterized by a focus on affordability and strategic growth. In his first Budget Statement, Prime Minister Lawrence Wong outlined a comprehensive strategy aimed at controlling cost pressures while driving the nation’s growth frontiers. Key priorities include tackling cost pressures through consumption vouchers and revamped property measures, which are designed to keep housing costs in check. In parallel, substantial government investments are earmarked to enhance Singapore’s capabilities in artificial intelligence, semiconductors, and biopharmaceuticals, as well as support critical energy and air infrastructure.
Tax incentives have been introduced not only to rejuvenate Singapore’s capital markets but also to support Singapore-based companies and fund managers with significant investments in Singapore-listed equities. With these measures, the budget has bolstered investor confidence in the nation’s defensive market
