The 15th day of the 8th month of the Chinese lunisolar calendar is believed to be when the moon is brightest and fullest, coinciding with harvest time in the middle of autumn.
Celebrated across Asia by the Chinese as the Mooncake Festival, or Chuseok in Korea and Tsukimi in Japan, traditional lantern lighting, gathering of families, visiting of friends and even courtship and matchmaking takes place under the watchful eye of Chang’e — the Moon Goddess of Immortality.
After all, in parts of China, apart from carrying lanterns, girls will pray to the goddess to help fulfil their romantic wishes.
This year, there will be prayers indeed as we lead up to Sept 17.
Apart from being the actual day of the Mid-Autumn Festival, it is also when the next FOMC meeting will occur.
Will they cut the Fed Funds Rate and provide long hoped- for relief for thousands of businesses weighed down by higher interest debt and millions of households on floating rate mortgages?
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Will it be 25 basis points (bps) as expected by the market to start what is hoped a Fed-engineered soft landing for the economy in the US?
Or will it be 50 bps as some early September market jitters rocked growth tech stocks again as recession fears popped into the narrative after a nice post-summer rebound? Nvidia led the ele- vator down 20% back above US$100 ($130.31) at the point of writing.
Will it be a Phuket-style full moon party where we party like its 1999 after the FOMC statement?
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It is hard to guess.
Dovish statements last week by Fed governor Christopher Waller and president John Williams of the New York Fed following underwhelming US employment numbers in August were interpreted as a sign of an impending recession with the Nasdaq shedding 2.4%.
Traders reacted to US Treasury yields, where the two-year treasury interest rate fell below its 10-year counterpart, which means the yield curve finally un-inverted.
Typically, an inverted yield curve — which had been the case since the series of Fed rate hikes in 2022 — could signal a potential future recession was on the cards, which happens as monetary policy squeezes out inflation by making overheated business spending or private consumption expensive.
However, the key is how central bankers navigate the turn and create a soft landing, cushioned by the US$6 trillion infrastructure investment plan.
Deutsche Bank strategist Jim Reid also warned that “the last four recessions only began once the curve was positive again”.
The shot across the bow had already been fired in early August when the carry trade of cheap Japanese yen borrowing unwound.
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If the Fed takes a 50 bps cut, the expectations of faster cuts may compress the carry trade further, leading to another bout of further de-risking into October.
Both the S&P500 and Nasdaq gave back 2.6% and 3.3% in the first week of September.
The Straits Times Index outperformed by flatlining after trying to head towards 3,500 with an early start out of the blocks.
However, it finished flat after trading within a small 2% range.
Our September Surprise prediction for Singapore’s outperformance has held thus far as we gear up for the Formula One (F1) races later this month.
If the market reaction to Fed speak is positive, we should be in for a continuation of good vibes in our local market, on top of good thrills around the Singapore circuit.
How should we position ourselves for that ride?
Shot in the arm needed
Several sectors in Singapore are indeed looking forward to the second half of September, where both the F1 crowd, as well as corporate CEO and private equity big spenders, descend to town for the many conferences like Super Return that roll right after the races.
Last year, a friend who operates a yacht business had all her craft of small to large sizes fully booked out by crypto bros in and around Token2049 as the Crypto Winter finally defrosted to spring, even if the summer highs of early August have not returned.
Many local retail, hospitality and F&B sectors, from the stories and anecdotes we see and hear, have suffered some hangover from Taylor Swift’s fanfare earlier this year and wouldn’t mind a success this month to catch up for a slower year-to-date.
Malls have also been quieter in early September, perhaps because of the school holidays.
Noticeably, amid the cacophony of mooncake box designs, prices this year started with an inflationary bang, with premium snowskin mooncakes going for as much as $100 per box.
With sales being slow as consumers and corporations alike appeared to baulk at the cost of these seasonal gifts, aggressive discounting started at the start of the lunar 8th month, two weeks before the festival — albeit from a higher base.
Compared to last year, higher stacks of mooncake boxes at fairs at VivoCity or Ngee Ann City and hotels were available for sampling and sale and then more for individual buyers.
Perhaps it was the unfortunate coincidence of school holidays followed by parents hovering over their kids’ impending PSLE at the end of September, holding them back from pounding the streets.
As with markets, often timing and coincidences are everything.
While I was chuffed to hear from a very kind-hearted retailer friend who had previously donated any surplus buffer stock to charities to bring cheer to seniors, orphans and underprivileged families just before the festival date, getting the call over a week before was telling.
I felt bad for the business owner who had made a gamble this year that did not work out.
More concerning, I was worried about how it reflects a reduction in local consumption as perhaps Singaporeans are spending more on (still) cheap Japanese holidays or across the Causeway.
This has been a recurring theme, as we have seen a succession of stories about high end even Michelin-starred restaurants closing their shutters.
Luxury expenditure, too, may have cooled as both locals and tourists appear to be more willing to buy experiences than items to flaunt.
Watch retailers who never had stock in the last two years, are now calling ultra-high-net-worth and high-net-worth clients if they still have an interest.
Offers in the secondary market abound with demand still slow.
While we may attribute some of this perhaps to the Fujian Gang money launderers being taken down or taking flight, it is clear that even if it was trickle-down, it kept some industries ticking.
With belts tightening a notch, I would choose any uptick in luxury retail, F&B and hospitality stocks in September to take profit or reduce.
Sticking to the essentials like Sheng Siong or regional basic consumer discretionary stocks, including DFI, Thai Beverage Y92 or Wilmar International F34 , may be better bets at current levels.
Like the mid-autumn legend of Hou Yi shooting the overheated lights out of 9 extra suns burning the land, one can only hope that the remaining one keeps shining after Chang‘e’s F1 night race is over at the end of 3Q2024, as that might be a glimmer of hope for new issues.
The darkest hour
The dearth of IPOs in Singapore this year has been much talked about since May.
The authorities have already responded with a very public capital markets committee review whose mandate to leave no stone unturned has seen several rather public announcements, including the launch of the committee by Minister Chee Hong Tat at the Singapore Exchange S68 (SGX) office itself.
Regular updates appear with working committee members named and a flurry of LinkedIn posts by a wider circle of market participants and industry groups, who had been invited to give their views in group meetings followed by ceremonial photos in the SGX IPO arena.
There must be some cause for optimism as reflected by SGX stock price, which continues its run past $11.
I see it as economic logic as SGX revenues are dominated by risk management products in equity index futures, FX and commodities derivatives.
It is also a good proxy for impending volatility in global markets after the US election and for institutions keeping equal weight in the STI financial sector to take some profit on banks in a declining rate environment and shift to the market operator.
Having said that, for retail investors and the popular media, the talk of IPOs is always a bigger story, even though its entire new and continuing listing contribution to SGX revenues is not material.
Therefore, there is much hope for IPOs, especially at this time of the year.
Those who understand the cycles for listings will know that the mid-year June is a typical accounting close for submissions for IPO applications, which take place after accounts are ready normally a couple of months after.
Failure to complete the listing process after half year ends in December will require a refresh of accounts.
Hence, going by this timeline, typically, October and November will be the rush for the IPO window before institutional and retail investors take off for the December holidays.
There is a theory that with all the public focus, this market is overdue for a bonanza come 4Q2024.
Chew On This is more cautious.
Apart from smaller catalist deals and maybe an odd secondary listing, we will unlikely see a supernova blockbuster IPO as hoped for in the coming quarter.
First, new REIT issues, our market’s forte, will not happen so soon.
Even if the Fed gives us the Mid-Autumn cut and secondary market prices of REITs are starting to recover, it will only make sense for stronger issuers to wait for capital rates to improve where they can sell at closer to net asset value.
That old projects are just starting to be dusted off still means we are 9–12 months away.
Second, there are structural issues that the committee is looking at, which include the limited funds that have mandates allocating purely to Singapore.
This can be overcome, of course, if we have a significantly large enough IPO that draws attention from institutional investors from other parts of the world to want to invest in a listing aspirant here.
At the minimum, one hopes that some additional one-off firepower beyond 65 Equity Partners at the pre-IPO level will be given to agencies or fund managers to invest as part of this review to catalyse the market.
However, it is unlikely that everything will be ready and in place in two months.
It may be more realistic for those hoping for IPOs to hang tight till 2Q2025 for some local but global champions.
These could include companies invested by Anchor Fund @65 and EDBI Growth IPO fund, which have invested in at least nine companies thus far.
There are those eager even for large secondary listings to materialise sooner, believing they could reopen the primary market here.
However, a secondary listing is not an IPO.
While it serves a purpose for the issuer or seller of shares on our market and may benefit from some trading volumes for the market operator, it is unlikely to create the spark that can excite the local investor market.
Witness Nio and Emperador.
Hence, after the Mid-Autumn full moon wanes, our IPO market may enter its darkest hour.
It could be a long winter past 1Q2025. However, if we are patient and do not harbour unrealistic hope, we are less likely to have a false start when the F1 race flags off again.
Chew Sutat retired from Singapore Exchange after 14 years as a member of its executive management team. During his watch, the exchange transformed from an Asian gateway into a global multi-asset exchange and he was awarded FOW’s Lifetime Achievement Award. He serves as chairman of the Community Chest Singapore
