Quoteworthy: "The shortage of foodstuff will inexorably lead to political chaos, which can result in the falling of many governments and the ousting of many politicians," — Ukrainian President Volodymyr Zelensky speaking at the IISS Shangri-La Dialogue 2022 on June 11
Fed announced largest rate hike in 28 years, more to come
The US Federal Reserve (Fed), on June 15, raised interest rates by 75 basis points — the biggest increase since 1994 — and Chair Jerome Powell signalled another big move next month, intensifying a fight to contain rampant inflation.
Slammed by critics for not anticipating the fastest price gains in four decades and then for being too slow to respond, Powell and colleagues on June 15 intensified their effort to cool prices by lifting the target range for the federal funds rate to 1.5% to 1.75%.
He says another 75 basis-point hike, or a 50 basis-point move, was likely at the next meeting of policymakers. They forecast interest rates would rise even further this year, to 3.4% by December and 3.8% by the end of 2023. That was a big upgrade from the 1.9% and 2.8% that they pencilled in for their March projections.
On the back of this announcement, stocks climbed, halting a five-day rout that took 10% off the S&P 500, while Treasury yields tumbled and the dollar pushed lower.
See also: ECB’s Schnabel sees only limited room for further rate cuts
Conversely, Bitcoin (BTC) was changing hands around US$21,444 ($29,759) about an hour after the meeting, up from US$21,076 when the decision was released.
“Overall economic activity appears to have picked up after edging down in the first quarter,” the Fed adds in its June 15 statement. “Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the [Covid-19] pandemic, higher energy prices, and broader price pressures.”
Job market data from the US Labor Department on June 3 showed that the US economy is showing no signs of buckling under the pressure of high inflation and rising borrowing costs.
See also: Stubborn US inflation set to reinforce Fed’s go-slow approach
The data also showed that US employers have added an average of 400,000 jobs each month since March, down from the nearly 600,000-per-month average pace from January 2021 to February of this year.
It is a downshift the Fed has reason to welcome, as it tries to tighten monetary policy fast enough to bring inflation down, but not so fast it triggers anything too negative. — Samantha Chiew
Singtel increased its stake in Thai subsidiary
Singapore Telecommunications (Singtel), via its wholly-owned subsidiary Singtel Global Investment, acquired some 121.16 million shares in Intouch Holdings for $330 million. The consideration of the shares represents a 5% discount to the volume weighted average price (VWAP) of each Intouch share on the Stock Exchange of Thailand for the 20 Thai trading days before the acquisition. The consideration will be satisfied in cash.
The shares were acquired from Temasek’s Anderton Investments, bringing Singtel’s total stake in Intouch Holdings to 24.99% from 21.21% previously. Singtel is one of Intouch’s two largest shareholders along with Gulf Energy, Thailand’s biggest power producer by market value. Gulf Energy, which is controlled by billionaire Sarath Ratanavadi, was said to have offered to buy the remaining stake it does not own in Intouch in April last year.
In a June 16 statement by Singtel, it says the acquisition reinforces the telco’s commitment to the Thai market which it has invested in for more than two decades. Through the acquisition of Intouch, which is the parent company of Advanced Info Service (AIS), Singtel will increase its economic interest in AIS, a regional associate of Singtel since 1999 and Thailand’s largest mobile operator with over 45 million mobile customers. It has been seeing strong growth in its enterprise business with the surge in demand for cloud, data centre and information and communications technology solutions.
Singtel Group CEO Yuen Kuan Moon says: “Intouch has been delivering good returns supported by consistently strong execution from AIS in one of the region’s most attractive markets. Our increased investment deepens our partnership with Intouch’s largest shareholder Gulf Energy, and is part of our strategy of actively recycling capital to invest for growth and shareholder returns. At the same time, it demonstrates our confidence in AIS’s potential to build on its position as the mobile operator of choice and become the leader in digital and enterprise services.”
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The transaction is expected to be completed by the end of June. — Felicia Tan
Sea to undergo major job cut
Sea is making its first major job cuts in areas spanning shopping and food, joining other tech firms downsizing this year in anticipation of unprecedented market and economic volatility. The tech firm plans to let employees go across its e-commerce division Shopee, the unit’s chief executive Chris Feng, said in an email to employees. It will reduce headcount across its ShopeeFood and ShopeePay divisions in Southeast Asia. The cuts will also extend across its Mexico, Argentina, and Chile teams, as well as the cross-border team supporting Spain.
Sea faces increasing pressure to slash costs as growth in its main commerce business comes off a pandemic-era high. While mobile gaming has proven more resilient, the company has lost about US$160 billion ($222 billion) of its market value since an October high as investors begin to scrutinise its longer-term trajectory.
“Given elevated uncertainty in the broader economy, we believe that it is prudent to make certain difficult but important adjustments to enhance our operational efficiency and focus our resources,” Feng said in his email to staff. He emphasised that the job cuts are to ensure that the business remains in the “best possible position” to continue scaling sustainably.
The dismissals come after Sea revised its full-year outlook for e-commerce sales, its main source of revenue, to US$8.5 billion to US$9.1 billion from its previous guidance of US$8.9 billion to US$9.1 billion. The company also posted a wider loss for the first three months as expenses soared.
Sea is now gradually reducing its overseas footprint and periphery businesses as competition takes a toll, a stark shift from its previous stance of continued spending for global growth. “This reallocation of resources to further focus on our priorities will help us grow our business even better,” said Feng in the email. “While we need to continue to optimise our efficiency, we are also generally still growing and hiring as needed to support that growth.”
Shopee will pull out of Spain as of the end of June 17, while it has already pulled out of India and France. The brand will focus on its core markets in Southeast Asia and Brazil. — Bloomberg
Kacific Broadband Satellites said to be in talks with Pegasus Asia spac for listing
Kacific Broadband Satellites, which provides high-speed internet access by satellite, is said to be in advanced talks to go public via a special purpose acquisition company (spac), with Pegasus Asia, according to people familiar with the matter.
Kacific is said to have agreed to enter into exclusive negotiations with one spac after months of negotiations, giving the potential partner a few weeks to conduct due diligence and finalise a deal. Pegasus Asia, led by CEO Neil Parekh, was said to have won the exclusivity in part because of its deep-pocketed backers and its location in Singapore. If completed, the deal would be Singapore’s first blank-cheque merger. Kacific’s valuation after a merger is expected to be about US$1 billion ($1.38 billion), but the terms including valuation are preliminary and talks could still break down.
A Kacific representative pointed out that several details were “inaccurate,” but declined to elaborate or specify which point they were referring to. Pegasus on the other hand on June 13 responded in a filing that the discussions for a potential business combination have not progressed beyond the preliminary stage and it has not entered into any binding agreement for such a transaction. It emphasised that no decision has been made as to whether to proceed and there is no certainty or assurance that a transaction will proceed or take place.
Shares of Pegasus Asia held steady at $4.70 in Singapore on June 15. The company raised $170 million in a January initial public offering. It is the first Singapore-listed spac with international backers, which include European asset manager Tikehau Capital and Financière Agache, a holding company of Bernard Arnault, head of French luxury group LVMH. — Bloomberg
