Investors shun risk as Christmas nears

This article is more than 12 months old

Straits Times Index rises slightly after six straight days of losses but not everyone was generous

'Tis the season for giving, yet investors are not being too generous towards risky assets.

The benchmark Straits Times Index did rise slightly on weak volumes yesterday to finish off the week at 3,385.71 points, up 3.18 points or 0.09 per cent.

But this recovery was after six consecutive days of falls from a year-to-date high of 3,468.77 points last Wednesday.

Companies on the Singapore Exchange (SGX) that have pursued debt-fuelled acquisitions were punished, perhaps on the back of worries over US Federal Reserve rate hikes next year.

Exhibit A is Lippo Malls Indonesia Retail Trust, a high-yield real estate investment trust (Reit) holding Indonesian retail assets.

Investors have piled into the Reit this year. It is now sinking on the back of Moody's note on Thursday that its debt is on review for a downgrade to "junk" status.

The rating agency cited a number of reasons, including weakening financial metrics, a refinancing hurdle next year and its exposure to the Lippo group of firms that are showing deteriorating credit quality.

"Companies on the Singapore Exchange that have pursued debt-fuelled acquisitions were punished..."

Lippo Malls hit a 10-month intraday low of $0.38 before finishing at $0.385, down 2.5 cents or 6 per cent.

First Reit, a Lippo-linked Reit that operates hospitals, was also down 1.4 per cent to $1.39. There was a block trade of 10 million shares made at $1.40.

Exhibit B is spirits firm Thai Beverage, which had announced a US$4.8 billion (S$6.45 billion) acquisition of a stake in Vietnam's largest brewer at the beginning of the week.

The brewer, Saigon Beer Alcohol Beverage or Sabeco, owns popular brands such as Saigon Beer and 333 Beer.

ThaiBev finished trading down 2.5 cents, or 2.7 per cent, to $0.91, on volume of over 63 million shares. Its last traded price is at a two-month low.

Its net gearing will soar from 0.23 time now to more than 1 time, analysts projected.

ThaiBev might be paying well over 40 times forward earnings for Sabeco. And in its bid to grow in the region, it is not too price-sensitive.

After all, Vietnam has a strong growth story, and significant beer brands are rarely on the block.

Exhibit C in risk-off behaviour is the bitcoin plunge.

The cryptocurrency had risen spectacularly from US$1,000 at the beginning of the year to US$10,000 at the beginning of December, and almost US$20,000 last week.

Yesterday afternoon, however, selling accelerated, with prices falling below US$13,000.

Among the SGX pennies, financially troubled First Ship Lease Trust spiked 19 per cent to $0.099 after its trustee-manager said its controlling unit-holder is in discussions to sell off its stake in the trust's sponsor and manager.

The controlling unit-holder is Godan GMBH, a subsidiary of German lender HSH Nordbank.

A long-term strategic investor controlling the sponsor can "greatly improve" prospects for a refinancing, the trustee-manager said.

Investors might be hoping for another deal. In October, the trust had announced that an April refinancing deal with Navios Maritime Holdings had fallen through.

All said, too much debt, like too much turkey at Christmas dinner, just does not do anyone much good.

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