Weekly Market Wrap | 24 February 2023

Topic #1: Has faith in China’s recovery dwindled?

The Hang Seng Index is now down 10.06% since its high in January. Some believe the market decline is due to growing geopolitical concerns and doubts over the strength of China’s economy. Investors are also seeking more evidence that the economy’s recovery is on safe footing, as a sharp three-month surge in the measure started to reverse in February

However, Goldman Sachs has expressed a positive outlook on China’s stock market, despite recent concerns around the country’s Covid resurgence and escalating tensions with the US. The firm believes that China’s stocks will continue to regain their momentum over time, with consumer sectors like the service industry expected to experience the most growth. In addition, Goldman Sachs anticipates that the Chinese government will announce new growth policies, further boosting the market. The firm predicts that the MSCI China Index will rise by 24% by the end of the year.

Why should I care?

For retail investors, this positive outlook on China’s stock market is significant as it suggests that there may be investment opportunities in the country. Additionally, the drop in China’s mortality rate indicates that the country is effectively managing the pandemic, which could lead to a rebound in oil prices as China’s demand for oil returns to pre-pandemic levels.

Overall, while China’s stock market has faced challenges recently, Goldman Sachs’ optimistic outlook suggests that the country’s stocks may continue to perform well, particularly in consumer sectors.

Topic #2: Record earnings from SG banks, DBS & UOB

Two of Singapore’s largest banks, DBS and UOB, have reported record earnings for 2022, signaling robust performance amid the pandemic recovery. 

DBS reported a net profit of SGD 8.19 billion for 2022, up by 20% from the previous year and marking the first time the bank’s net profit has exceeded SGD 8 billion. The bank’s total income also grew by 10% to a new high of SGD 14.5 billion. DBS’s performance was driven by strong growth in its key markets of Singapore, Hong Kong, and Indonesia. The bank raised its dividend by 5 cents to 42 cents per share and announced a special dividend of 10 cents per share.

Similarly, UOB reported record earnings of SGD 4.57 billion for the year ending December 31, 2022, up by 12% from the previous year. The bank’s core operating profit also rose by 11%, driven by growth in its key geographies amid rising interest rates. UOB’s board proposed a final dividend of 75 cents per share, bringing the full-year dividend to $1.25 per share.

What do strong financials mean?

These strong financial results reflect the banks’ focus on innovation and digital transformation, as well as their ability to adapt to changing market conditions. Retail investors should take note of these developments as they suggest that the Singaporean banking sector is performing well and may present opportunities for investment.

Additionally, as the banks continue to invest in technology and digital capabilities, they may be well-positioned to benefit from the shift towards digital banking and the growth of fintech in Singapore and the wider region. Investors should also monitor the banks’ responses to regulatory changes, such as the MAS’s recent announcement of new rules for digital banks.

Overall, the record earnings reports from DBS and UOB suggest that the Singaporean banking sector is in a strong position, with opportunities for growth and investment. Retail investors should keep an eye on these developments and consider the banks’ digital strategies, as well as regulatory changes that may impact the industry.

Topic #3: Walmart’s uncertain outlook

Walmart, the world’s largest retailer, reported strong financial results for the last quarter of 2022, with sales at US stores open for at least a year growing by 8%, well above analysts’ expectations. However, the company’s outlook for the current year disappointed investors, causing a sell-off in Walmart shares. Walmart’s forecast suggests that its annual profit could decline for the second consecutive year.

What does this mean?

The reason for the company’s cautious outlook is multifaceted. First, Walmart’s recent success is mainly due to low-margin products such as groceries and discounted goods. As a result, the company’s profitability has taken a hit. Second, despite an improving economic outlook, consumers’ savings rates remain low, indicating that they are still cautious about spending. Third, Walmart’s suppliers are increasing their prices, which could further erode the company’s profitability.

Moreover, Walmart’s disappointing outlook follows similar warnings from other major retailers, including Home Depot, which missed sales expectations for the first time since the pandemic began and predicts that its sales won’t grow in 2023. This development has led to concerns that the retail industry may face a challenging year.

Why should I care?

Retail investors should pay attention to these industry trends and their potential impact on individual companies. Walmart’s performance, in particular, is closely watched, as it serves as a bellwether for the broader retail industry. Investors should also consider the company’s efforts to adapt to changing consumer behaviors and preferences, such as its investments in e-commerce and last-mile delivery capabilities. Overall, while Walmart’s recent financial results show that the company is resilient, its outlook highlights the challenges that the retail industry is facing in the current economic environment. 

Source: The Wall Street Journal, FactSet

IndexLevel1 Week1 MonthFrom Jan 1 2023
S&P 500 (US Stocks)3,970-2.63%-1.15%3.82%
Nasdaq 100 (US Tech Stocks)11,969-3.10%1.31%10.19%
CSI-300 (Chinese Stocks)4,0610.52%-3.34%4.45%
Bitcoin (in USD)23,112-6.02%0.06%39.43%

Source: Google Finance, as of 25th February, 2023

Previous articleWeekly Market Wrap | 10 February 2023
Next articleWeekly Market Wrap | 03 March 2023