Weekly Market Wrap | 29 April 2023 Leave a comment

#TechEarnings #USGDP #PropertyTaxes

Meta, Alphabet and Amazon price chart (Source: Google Finance)

On Thursday, strong quarterly results from tech giants Facebook parent Meta Platforms Inc, Alphabet Inc, and e-commerce giant Amazon.com Inc led a rally on Wall Street. The S&P 500 Communication Services Index saw its biggest one-day percentage gain since February 2022, rising by 5.5%.

Shares of Meta surged 13.9% and reached their highest level in over a year following the company’s announcement of a quarterly revenue forecast that exceeded expectations. Mark Zuckerberg, the CEO, also mentioned that the implementation of AI has resulted in increased traffic to its services and a rise in advertising revenue.

Alphabet’s revenue surged by 34% due to strong growth in its search and advertising businesses, and Amazon.com beat expectations with a net sales increase of 44% to $108.5 billion. These results increased investor confidence, resulting in gains of 5.5% for the communication services sector and 2.8% for the consumer discretionary sector.

Analysts have revised their estimates for first-quarter earnings, with a projected year-over-year profit drop of 2.4% for S&P 500 companies, a significant improvement from the 5.1% decline forecasted at the beginning of the earnings season. Despite slower GDP growth, the Federal Reserve is still anticipated to increase interest rates by 25 basis points next week. Investor attention is mainly on the positive earnings reports and optimistic outlook for tech giants, such as Facebook, Alphabet, and Amazon, with less emphasis on the overall economic climate.

US QoQ GDP growth (Source: Yahoo Finance)

What happened?

The US economy experienced slower-than-expected growth in the first quarter of 2023. According to the Bureau of Economic Analysis, the initial estimate of first-quarter GDP revealed an annualized growth rate of 1.1%, which is lower than the projected 1.9%. 

The first-quarter GDP growth was slower than expected primarily due to declines in wholesale trade, single-family construction, and manufacturing. The drop in single-family construction was particularly significant. However, personal consumption expenditures excluding food and energy prices increased, surpassing Bloomberg economists’ expectations of a 4.7% increase by 0.2%. The Core PCE, an important inflation gauge for the Federal Reserve was closely monitored in the report.

What does it mean for the investors?

Investors are becoming increasingly concerned about the future, due to the slow GDP growth in the US and other recent economic indicators. The decrease in consumer confidence about the economy adds to their worries. However, there are some positives to take as well from the earnings of various companies that have been reported highlighting that the macroeconomic data might not be that big a worry and a recession can still be avoided. Bond markets still look uncertain at the moment with analysts pricing the last rate hike of 25 bps by the Fed.

To address the escalating property prices, Singapore has introduced fresh measures, which includes a substantial rise in property taxes for foreign purchasers up to 60%. The government aims to keep housing affordable for locals by ensuring that real estate prices remain in line with economic fundamentals. 

The additional buyer’s stamp duty (ABSD) will also increase for Singapore citizens and permanent residents, but by smaller amounts and only for their second and subsequent property purchases. Singaporeans’ ABSD rates will rise from 17% to 20% for their second and subsequent home purchases, and from 25% to 30% for their third and subsequent properties. Permanent residents’ ABSD rates will increase by 5 percentage points to 30% and 35%, respectively.

The government has already implemented two rounds of cooling measures in the past two years to combat the rising property prices. In December 2021, the government increased stamp duties, citing the robust property market despite the economic impact of COVID-19. Construction delays caused by COVID-19 have contributed to a steady increase in property prices and rents in Singapore in recent years. According to the Urban Redevelopment Authority (URA), private home prices in Singapore rose by 3.2% in the first quarter of 2023, up from 0.4% in the previous quarter.

What does it mean for the investors?

The revised stamp duty rates are expected to affect around 10% of residential property transactions based on last year’s data. The government’s efforts to stabilize the property market aim to prevent a sustained increase in prices relative to incomes, which could lead to a housing affordability crisis. The new measure is expected to have the greatest impact on the demand for luxury properties in the short to medium term. Investors should factor in the impact of this while valuing REITs and real estate companies as the expected cash flows might be impacted in the short to medium term as well.

Index Level 1 Week 1 Month From Jan 1 2023
S&P 500 (US Stocks) 4,169 +0.91% +3.52% +9.03%
Nasdaq 100 (US Tech Stocks) 13,246 +2.04% +3.11% +21.94%
CSI-300 (Chinese Stocks) 4,029 -0.06% +0.57% +3.63%
Bitcoin (in USD) 29,369 +6.72% +3.60% +76.87%

Sources: Yahoo Finance, Google Finance, CNBC, Bloomberg


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