Quoteworthy: "Mission largely accomplished ... hasta la vista, baby." — UK’s Boris Johnson, signing off at his final parliamentary appearance as Prime Minister.
Apple to slow hiring and spending next year
Apple plans to slow hiring and spending growth next year in some divisions to cope with a potential economic downturn, according to people with knowledge of the matter.
The decision stems from a move to be more careful during uncertain times, though it is not a company-wide policy, said the people, who asked not to be identified because the deliberations are private. The changes will not affect all teams, and Apple is still planning an aggressive product launch schedule in 2023 that includes a mixed-reality headset, its first major new category since 2015.
Still, the more cautious tone is notable for Apple, a company that has generally beat Wall Street predictions during the Covid-19 pandemic and has weathered past economic turmoil better than many peers.
Apple shares fell 2.1% to US$147.07 ($205) after Bloomberg reported on the slowdown, marking the biggest one-day decline in almost three weeks. The stock has slipped about 17% ytd, on par with the broader market. Shares of other tech companies also declined on the news released on July 17. Analysts expect Apple to report third-quarter revenue of about US$83 billion, slightly above the year-earlier period, when it releases results on July 28.
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During the last earnings call, CEO Tim Cook says Apple was “seeing inflation” and that the impact was evident in its gross margin and operating expenses. The company also cited a continued negative impact from Covid-19 and rising freight costs. It declined to provide specific revenue guidance. — Bloomberg
ABS and industry steering committee finalise key settings of MAS recommended rate
The Association of Banks in Singapore (ABS) and the steering committee for SOR and SIBOR transition to SORA have finalised the settings of the Monetary Authority of Singapore (MAS) recommended rate (or MRR). The rate will serve as the contractual fallback reference rate in wholesale SOR contracts after Dec 31, 2024. SOR stands for the Singapore Swap Offer Rate, while SIBOR stands for the Singapore Interbank Offered Rate. SORA stands for the Singapore Overnight Average.
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The committee has set out supplementary guidance to help market participants price the conversion of wholesale SOR contracts to SORA for the current period until Dec 31, 2024. These were set out in the committee’s response to the consultation published on May 18.
The consultation in May had recommended for the adjustment spreads in the MRR to be determined by a five-year historical median of the spread between SOR and compounded SORA-in-arrears.
There are four key settings of the MRR and its supplementary guidance for active transition of legacy wholesale SOR contracts. First, the MRR for the respective tenors (overnight, one, three and six months) will be computed as the sum of compounded SORA-in-arrears and an MRR adjustment spread for the respective tenor.
Second, the applicable MRR adjustment spread will be determined using the historical median of the spread between SOR and compounded SORA-in-arrears for the respective tenor, using a five-year lookback period ending July 18. Third, the committee’s supplementary guidance will apply to active transition of SOR corporate loans, bonds and derivatives contracts to SORA until Dec 31, 2024.
The applicable adjustment spread for interest rate periods till Dec 31, 2024, should be computed from a linear interpolation between the Reference Spot Spread and the applicable MRR Adjustment Spread for interest rate periods after the same period.
The reference spot spread will be determined using the historical median of the spread between SOR and compounded SORA-in-arrears for the respective tenor, using a six-month lookback period ending July 18.
Finally, the committee’s supplementary guidance is to be applied directly to the transition of unhedged loans. This means that there will be no need for further negotiations on pricing. The guidance can serve as a reference starting point for counterparty discussions on the transition of bilateral derivatives and hedged loans.
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The committee’s guidance is said to provide clarity on the pathway for the eventual transition of all legacy SOR contracts to SORA, and will further facilitate the industry’s transition away from SOR ahead of its discontinuation after June 30, 2023. — The Edge Singapore
Singapore’s NODX rose by 9% in June
Singapore’s non-oil domestic exports (NODX) expanded by 9% y-o-y in June, following the 12% growth seen in May, according to data released by Enterprise Singapore on July 18. The expansion was mainly attributable to the increase in non-electronic exports such as food preparations, petrochemicals and measuring instruments, although electronics exports also grew during the month.
Electronic NODX rose by 4.1% in June after the 12.9% growth in May, with integrated circuits (ICs), parts of ICs and disk drives, contributing most to the growth. ICs, parts of ICs and disk drives, rose by 26%, 86.1% and 18% respectively on a y-o-y basis.
Non-electronic NODX rose by 10.6% in June, extending the 11.7% rise in May. The growth was contributed most by food preparations, petrochemicals and measuring instruments at 48%, 21.1% and 30.9% respectively. The expansions for food preparations and petrochemicals stem from a low base a year ago. On a m-o-m seasonally adjusted basis, NODX increased by 3.7% to $17.7 billion, with growth in both electronics and non-electronics during the period.
In June, NODX rose to the top 10 markets as a whole, with the largest contributors being the US, Malaysia and Indonesia at 21.5%, 43% and 21.6% respectively. NODX to the US expanded after the 9.6% decline in May. This month, food preparations (+92.7%), specialised machinery (+25.3%) and telecommunications equipment (+67.5%) were the biggest contributors to the NODX to the country
NODX to Malaysia increased due to ICs, non-monetary gold and specialised machinery at expansions of 160.9%, 103.2% and 43.6% respectively on a y-o-y basis. NODX to Indonesia grew by 21.6% in June due to plastic plates and sheet, non-monetary gold (with a 435.3% y-o-y growth) and iron and steel scrap (which saw an 180.4% y-o-y growth). Finally, NODX to the EU 27 (which refers to the 27 European Union countries after the UK left the EU), Hong Kong, South Korea and Thailand declined in June.
NODX to emerging markets expanded by 30.3%, easing from the 61.9% expansion seen in May. This month, the growth in NODX markets was mainly due to the 208.9% expansion in Latin America. South Asia and CLMV (Cambodia, Laos, Myanmar and Vietnam) also contributed to the expansion with y-o-y growths of 48.5% and 15.6% respectively. Meanwhile, non-oil re-exports (NORX) grew by 31.4% y-o-y in June, extending the 19.2% growth seen in May. This was due to expansions in both electronics and non-electronics.
On a y-o-y basis, electronic NORX expanded by 34.5% due to ICs, diodes and transistors and telecommunications equipment registering expansions of 37.1%, 84.5% and 27% respectively.
Non-electronic NORX expanded by 27.8% y-o-y due to non-monetary gold, specialised machinery and non-electric engines and motors at 205.6%, 116.1% and 42.3% respectively. On a m-o-m seasonally adjusted basis, NORX grew by 3.7% in June to $33.9 billion. Electronic NORX grew, while non-electronic NORX declined.
NORX to the top 10 markets as a whole rose in June, with the top three contributors being Malaysia, Hong Kong and the US. Malaysia contributed 70.5% to the growth while Hong Kong and the US contributed 20.3% and 38.8% respectively.
Oil domestic exports, on the other hand, grew by 66.2% in June on a y-o-y basis, easing from the 86.4% y-o-y expansion in May, because of higher exports to Malaysia (+165.7%), Australia (+60.9%) and Panama (+97.3%).
In volume terms, oil domestic exports declined by 9.9% in June, following the 1.7% decrease in the previous month. On a m-o-m seasonally adjusted basis, oil domestic exports declined by 3% in June, after the 8.4% growth in May.
Overall, total trade grew by 31% in June, following the 32.1% expansion in May. During the month, total exports expanded by 29.5% and total imports grew by 32.5%. On a m-o-m seasonally adjusted basis, total trade rose by 1.3% to $123.5 billion. — Felicia Tan
Tesla sells majority of stake in Bitcoin
Tesla sold a significant chunk of its stake in Bitcoin, an investment that helped legitimise the world’s largest electronic currency. “As of the end of 2Q, we have converted approximately 75% of our Bitcoin purchases into fiat currency,” Tesla says in a shareholder letter dated July 20 as part of the company’s earnings report. “Conversions in 2Q added US$936 million ($1.3 billion) of cash to our balance sheet.”
The electric-car manufacturer disclosed in February 2021 that it had invested US$1.5 billion in Bitcoin, and subsequently sold 10% of its stake that April. On July 20, Tesla says its digital assets have shrunk to US$218 million, and that a Bitcoin impairment hurt second-quarter profitability.
Tesla CEO Elon Musk adds on the earnings conference call that the company sold the Bitcoin to maximise its cash position because of uncertainty related to the Covid-19 shutdowns. He notes that the sale should not be seen as “some verdict on Bitcoin.”
The cryptocurrency has retreated from a record high of almost US$69,000 in November and falling as much as US$1.6% to US$22,928 after sales were disclosed. Josh Olszewicz, head of research at crypto fund manager Valkyrie Investments, says rough estimates would place Tesla’s Bitcoin sales at around the US$30,000 price level, with US$218 million in remaining digital assets on its balance sheet.
“Strongly bearish market conditions since the beginning of the year as well as the need for cash on the balance sheet likely contributed to this decision. From a treasury management perspective, downside volatility may have been too unattractive to ignore in the near-term,” Olszewicz adds. — Bloomberg
