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Singapore stock market and companies daily report (SingTel, Emirates) (September 19, 2012)

Contributed by Shares Investment

QE3 – A Big Rally In S’pore Stock Market May Not Materialise
Investors hoping to ride the rising wave in the Singapore equities market after last week’s announcement of a third round of quantitative easing (QE3) in the United States (US), where the Federal Reserve has pledged to purchase treasury bonds for an undisclosed time period until the economy recovers, may be in for a disappointment themselves. The potential gains may not be as much as many would have expected, and the rally in the benchmark Straits Times Index (STI) thus far is not going to be sustainable in the long run. The main reason is that the money flows that will likely to head this part of the world could go to other stock markets in the region (potential in the local stock market is seen as limited after their recent strong run) or the property market in Singapore. Furthermore, there are many risks that remain such as the US Presidential election, the ‘fiscal cliff’ and the Iran situation, Morgan Stanley said in a report. The ‘fiscal cliff’ refers to the spending cuts and tax increases which will automatically kick in next year, potentially driving the US into recession.
Significance: Macroeconomic fundamentals remain weak as Singapore’s export growth numbers came in below consensus and couple with the purchasing manager indices hovering at 50 or below indicating mild contraction, investors might want to be cautious in the long run.

SingTel Ponders Renewing F1 Sponsorship Deal
It is the time of the year for the Singapore Grand Prix as SingTel mulls over whether to remain in the driver’s seat as title sponsor beyond 2012. A spokesman for SingTel said: “We have not yet made a decision as to whether we will continue our sponsorship. A decision will be made after this year’s Formula One (F1) event.” The title sponsorship is said to cost SingTel between $10 million and $15 million per year. Beyond 2012, the title sponsorship largely hinges on the negotiations for a five-year extension to Singapore’s F1 contract which is said to be at a stalemate now. However, the existing contract will require Singapore to serve out a two-year notice if it chooses not to renew, suggesting a title sponsor will be required till at least 2014. In July, Second Minister for Trade and Industry S Iswaran stated that negotiations with F1 have carried on longer than anticipated and said that a decision on remaining an F1 venue is expected to be made by June next year.
Significance: Though the sponsorship of the race has strengthened SingTel’s brand awareness on a global level, the decision to remain title sponsor largely lies on one of the key factors which is whether the race is extended beyond two years, according to sources.

Emirates’ Aggressive Expansion Plan A Boon For Changi Airport, A Bane For SIA
Dubai-based Emirates announced that it will significantly increase capacity on its Singapore-Dubai route by launching A380 services. An announcement that came just days after it tied up an alliance with Qantas which will see the Australian carrier move its intercontinental hub from Singapore to Dubai. Emirates will boost capacity on the Dubai-Singapore sector by 46 percent with the introduction of its giant 517-seat A380 aircraft starting 1 December. This will replace Emirates’ 354-seat Boeing 777-300ER, boosting Emirates’ total capacity across four daily services from Dubai to Singapore to 1,659 seats daily. Salem Obaidalla, Emirates senior vice-president, commercial operations, Far East and Australasia acknowledged: “Despite the current global economic uncertainty, we remain committed to the Singapore market adding significant seat capacity – over 2,200 seats a week – which is set to foster tourism and trade between Singapore, Dubai and beyond.”
Significance: This move by Emirates cements Changi Airport’s status as its South-east Asian hub, boosting its reputation as a premier aviation hub for the region. However, on the flip-side it spells trouble for the flag-carrier Singapore Airlines (SIA) as it battles rising competition from Middle Eastern airlines on its European services.