Slowing Singapore economy drives profit drop

The trade-dependent nation also has to deal with the fallout from the US-China spat
Chief Investment Office21 Aug 2019
    Photo credit: AFP Photo


    A year after taking the helm of Hong Kong’s biggest conglomerate from his father Li Ka-shing, Victor Li is making a USD3.3b bet that Brexit would not dent the value of UK pubs or the land under them.

    The family’s CK Asset Holdings Ltd unit agreed to pay GBP2.7b (USD3.3b) for Greene King Plc, which operates more than 2,700 British bars, restaurants, and hotels.

    CK Asset said “pubs will continue to be an important part of British culture and the eating and drinking out market”. The conglomerate’s UK expansion signals confidence that turmoil around the country’s plan to exit the European Union would not sink the economy, even as it erodes the price of the country’s currency and assets.

    Greene King had lost more than one-third of its market value over the past four years prior to news of the deal, while the pound has depreciated about 18% against the Hong Kong dollar since the June 2016 Brexit referendum.

    The Li family controlled group already has a sprawling European footprint after the company bought up retailers including A.S. Watson Group, telecom operators like Italy’s Wind Tre; and utilities including Northumbrian Water Group Ltd, Wales & West Gas Networks Holdings, and Eversholt Rail Holdings UK Ltd. Europe accounted for 55% of earnings in the first half of this year for the flagship CK Hutchison Holdings Ltd, with 22% of the total coming from the UK.

    In June, CK Asset spent GBP1b (USD1.2b) to acquire the London headquarters of UBS Group AG.

    CK Hutchison shares slumped about 15%, compared with a 37% gain for the Hang Seng benchmark, between the June 2016 Brexit vote and late June this year, when Hong Kong erupted in protests against a bill to allow extradition to China. The stock has slumped a further 9% since the demonstrations began. – Bloomberg News.

    The Hang Seng Index slid 0.23% to 26,231.54 on Tuesday (20 August).

    Meanwhile, the Shanghai Composite Index lost 0.11% to 2,880.00.



    Singapore’s slowing economic growth has started to hurt company earnings as a trade war intensifies between its two biggest trading partners.

    By one measure, companies in the benchmark Straits Times Index posted their first profit decline in six quarters in the three months ended June, according to data compiled by Bloomberg. Meanwhile, 23 of the 30 stocks in the gauge saw cuts in earnings estimates after reporting quarterly results, according to a financial firm.

    Earlier this month, the trade-dependent nation lowered its economic growth forecast for this year to almost zero on escalating US-China tensions. Analysts expect profits to deteriorate throughout 2019 as a result.

    Constituents of the index posted a 0.1% y/y decline in diluted earnings per share from continuing operations in the three months ended June, data compiled by Bloomberg show. That is the first such drop since the quarter ended December 2017.

    The benchmark stock gauge has fallen about 5% this month, getting closer to erasing its gain for 2019. Just last month, investors were sanguine about Singapore’s equity market given the positive outlook for dividends and diversified operations. Singapore’s primary index is still up 2.2% in 2019, compared with a 5.2% decline in Malaysia’s benchmark gauge, and a 1.6% advance in Indonesia’s Jakarta Composite Index. – Bloomberg News.

    The Straits Times Index rose 0.24% to 3,135.95 on Tuesday (20 August).

    Australia’s S&P/ASX 200 Index fell 0.70% to 6,499.40 at the open on Wednesday. The index hit a one-year high on Tuesday before settling up 1.20% at 6,544.96.

    South Korea’s Kospi Index slipped 0.05% to 1,959.20 at the open on Wednesday. It climbed 1.05% to 1,960.25 on Tuesday.

    The Taiwan Stock Exchange Weighted Index gained 0.32% to 10,522.50.

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