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Global Stocks

Winners and losers of higher aluminium prices

• Aluminium on the LME jumped by roughly 6% to c. USD3,492 per tonne after Iran struck production facilities in the UAE and Bahrain
• The Middle East accounts for a meaningful share of global aluminium output, hence temporary disruptions could tighten supply, particularly if shipping routes and raw material flows remain constrained
• We highlight the following winners and losers of higher aluminium prices
• Aluminium companies are the primary beneficiaries: Both China Hongqiao and Aluminium Corp of China, would benefit from tighter global supply and higher aluminium prices. Our analyst prefers China Hongqiao for its diversified raw material sourcing and low-cost integrated model
• Consumer companies face higher packaging costs: Higher aluminium prices could increase packaging costs for Thai Beverage due to its use of aluminium cans for beer. Every 10% increase in aluminium prices could translate into c.2% decline in earnings, after accounting for demand adjustments
• Impact on tech is mixed, depending on pass-through ability. While aluminium is used in Innotek’s components for AI server racks, the impact should be limited as raw material costs are typically passed on to customers. In contrast, segments such as TV/Display are more cost sensitive, which makes it harder for manufacturers to fully pass through higher aluminium costs

Singapore Retail REITs

False news on Cotton On store closures in Singapore

• Cotton On refuted initial reports that they are closing in Asia; the entity being wound down is understood to be dormant
• The group owns household brands such as Cotton On, Typo, Rubi and operates over 30 stores across Singapore through its umbrella brands
• Cotton On Asia remains current on its rental obligations to retail landlords, with at least 2-3 months’ security deposit in place; exposure to our retail S-REITs is limited at below 1%
• Current tight retail landscape, with dominant malls at sub 1% vacancy suggests that these prime retail lots can be quickly released at potentially higher rents

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