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Singapore’s small and medium-sized enterprises (SMEs) extended their growth momentum for a second consecutive quarter, according to the latest OCBC SME Index released on Oct 15.

The improvement was fuelled by broad-based growth across almost all industries, with manufacturing returning to expansion after five consecutive quarters of contraction.

The quarterly index, which tracks the business health and performance of SMEs, rose to 50.8 in the third quarter of 2024 from 50.2 in Q2.

A reading above 50 signals increased business activity compared to a year ago, while a score below 50 indicates a contraction.

The index is compiled from the transactional data of more than 100,000 OCBC SME customers in Singapore, each with annual revenues of up to $30 million.

In Q3, SME collections increased by 0.4 per cent year on year, while payments edged up by 0.3 per cent, reflecting a modest rise in operating costs.

Out of the 11 industries tracked, nearly all – except for information and communication technology (ICT) – were in expansionary range, up from seven in the previous quarter.

The manufacturing industry saw its index climb to 50.4 in Q3, up from 49.9 in Q2, driven by a 9.8 per cent year-on-year increase in collections. However, this was tempered by a 6.8 per cent rise in payments.

Overseas collections and payments also surged, rising by 25.5 per cent and 40 per cent, respectively, compared with the same period last year.

“While the recovery in global electronics demand, and improvement in business sentiments and factory output bodes well for SMEs in the industry, it remains to be seen whether growth can be sustained in the near term,” OCBC said.

Domestically oriented industries, such as food and beverage, healthcare, retail, and education, continued to “see healthy business activity”, maintaining levels similar to those seen in Q2.

In Q3, both the business services and building and construction industries returned to expansionary territory, after previously contracting.

Business services saw its index rise to 50.6, supported by strong performances in the advertising and exhibition and accounting and legal segments.

Similarly, the building and construction industry posted an index of 50.4, rebounding after a dip in the previous quarter. Although collections increased, this growth was partly offset by a rise in payments.

ICT contraction

The ICT industry, however, continued to struggle, with the index slipping to 48.7 in Q3 – marking its ninth consecutive quarter of contraction.

Although IT consultancy and ICT manufacturing and sales recorded expansionary readings of 50.2 and 50.5, the industry remained under pressure due to weaknesses in the data processing and software development segment, which registered a reading of 48.1.

Despite these challenges, ICT business owners were relatively optimistic, with 53 per cent expecting business conditions to improve over the next six months, while only 9 per cent forecast further deterioration.

Looking ahead, the index is expected to remain slightly expansionary in Q4, supported by a recovery in global electronics demand and the prospect of further interest rate cuts.

“However, downside risks persist, as heightened geopolitical tensions would result in greater uncertainty in the macroeconomic environment,” OCBC cautioned.

Business confidence among SME owners remained similar to the previous quarter, with 48 per cent of the 1,100 respondents expecting improved performance over the next six months.

Another 40 per cent foresee steady conditions, while 11 per cent anticipate a downturn.

Source: Straitstimes

Crypto miner Iren — formerly Iris Energy — also saw double-digit percentage point gains of 10.21%, while competitors TeraWulf and MARA Holdings, formerly Marathon Digital, rallied 6.65% and 5.6%, respectively.

Change in the share price of the eight largest crypto mining firms by market cap on Oct. 14. Source: Companies Market Cap

“Uptober” — a bullish term for October that has seen Bitcoin’s price increase in nine of the last 11 Octobers — often kickstarts strong fourth quarters for Bitcoin, CoinGlass data shows.

Bitcoin’s month-on-month returns since 2013. October highlighted in blue. Source: CoinGlass

Source: Cointelegraph

The swift fraying of the proposed union between German insurer Allianz and Singapore’s Income Insurance has left people close to the matter shell shocked and red-faced.

Sources told The Straits Times that parties who would normally have been kept abreast of developments in the proposed deal were left in the dark about the Government’s move on October 14 to halt the planned marriage.

It comes after Allianz on July 17 made an offer to buy a controlling stake of at least 51 per cent in Income in a deal that was valued at $2.2 billion. The offer was subject to regulatory approval.

ST was told that Allianz and NTUC Enterprise, which is a major shareholder of Income, were informed of the rejection only shortly before the Government’s decision was made public in parliament.

Key people close to the proposed deal said the decision was kept to a small group and that they were not privy to the decision, which has been described as “a total shock”.

“No one (in the team) had any inkling,” said an individual close to the matter.

The move, announced in Parliament on Oct 14 by Mr Edwin Tong, who is Minister for Culture, Community and Youth (MCCY), and also Second Minister for Law, came on the back of new information disclosed after an Aug 6 parliament sitting.

Allianz, in its business plan submission to the Monetary Authority of Singapore (MAS), said it could return around $1.85 billion in cash to its shareholders. This would be within the first three years after the transaction wraps up.

It is worth noting that the business plan submission is separate from the voluntary offer to acquire a stake in Income.

In 2022, when Income switched from a co-operative to a corporation, MCCY had allowed it to keep around $2 billion in surplus as the insurer continued running its business.

Without this MCCY exemption, the surplus would have been handed to the Co-operative Societies Liquidation Account to benefit the co-op movement in Singapore, as required under the law.

Mr Tong’s point was that it is unclear what Income might do after the suggested capital extraction, such as whether it would trim its insurance portfolio.

Coupled with the fact that NTUC Enterprise will be a minority shareholder after the deal, he said the government decided to block the deal in its current structure.

The Insurance Act will also be amended so that MAS has to factor in MCCY’s views when it comes to insurers that are co-operatives or related entities.

Source: Straitstimes

ECB meets on Thursday

The ECB will hold its penultimate meeting for 2024 on Thursday, just five weeks after the September gathering that produced another rate cut. It has been an eventful period for the markets with the Fed announcing a 50bps rate cut and the conflict in the Middle East moving up a notch.

In the meantime, the eurozone data continued to worsen. Most notably, the September PMI surveys, predominantly the manufacturing ones, confirmed the rather protracted soft patch experienced by the euro area economy, particularly in Germany, and the September headline CPI figure dropped below 2% for the first time since July 2021.

These developments, i.e. the aggressive Fed rate cut, the weak growth outlook and satisfaction from the euro area inflation prints, allowed most ECB members to move from vague comments about the need for further rate cuts to openly state their preference for an October move. The difference between the recently published minutes of the September meeting and the ECB members’ most recent rhetoric is quite telling.

This shift is also reflected in market expectations. The probability of an October 25bps cut was around 30% after the September gathering, but it quickly rose to fully price in this rate move. It is currently hovering around 99%, which, in the eyes of the market, makes this week’s rate cut a done deal.

Is the rate cut really a done deal?

Frankly, the September CPI report was not surprising, as President Lagarde had already announced that the ECB expects a weak print, with inflation rising again towards the end of 2024. Interestingly, there are no staff projections this time around, and considering the fact that the meeting comes only five weeks after the September one, some ECB members might be inclined to wait until December. Additionally, Thursday’s gathering will take place in Ljubljana, Slovenia and the ECB usually, but not always, prefers to announce rate changes when the meeting is hosted at the ECB tower in Frankfurt.

This extra time until the December gathering is probably important for other reasons. The ECB could examine any likely Fed announcements on November 7, where the outlook is equally complicated following the recent strong jobs data, and digest the outcome of the US presidential election.

But the most important factor for pausing on Thursday might be that in September the ECB adjusted its rates profile. The deposit rate was cut by 25bps to 3.5%, but the gap with the main ECB rate dropped to 15bps from 50bps, with the latter dropping to 3.65% from 4.25% before the September gathering.

The market is convinced of the need of another rate cut

Despite the plethora of reasons for a pause, the ECB has to take tough decisions based on the incoming data and the overall economic outlook. It is obvious that the eurozone economy is barely growing with Germany officially expected to contract for a second year running, and with no help expected at this stage from China. Therefore, another 25bps rate cut could only prove beneficial for the eurozone economy.

At the end of the day, an agreement could provide a solution. The doves might begrudgingly accept a pause on Thursday in exchange for a strong pre-commitment for a 25bps rate cut in December, possibly more if needed.

The euro could suffer from a dovish rate cut

Despite the recent upleg in euro/pound, mostly on the back of the early October comments from Governor Bailey for a more aggressive BoE stance in terms of the rate cuts, the downward trend from the November 2023 high remains in place.

A dovish rate cut on Thursday will probably allow euro bears to overcome some key support levels and test again the 0.8304 level. On the flip side, a surprising rate pause could cause a sizeable upleg in euro/pound with the 0.8500 area looking like a plausible target.

Global public debt is set to reach US$100 trillion (RM430.69 trillion) or 93% of global gross domestic product by the end of this year, driven by the US and China, according to new analysis by the International Monetary Fund.

In its latest Fiscal Monitor — an overview of global public finance developments — the IMF said it expects debt to approach 100% of GDP by 2030 and warns that governments will need to make tough decisions to stabilise borrowing.

Debt is tipped to increase in the US, Brazil, France, Italy, South Africa and UK, according to the IMF report, which urges governments to rein in debt.

“Waiting is risky: country experiences show that high debt can trigger adverse market reactions and constrains room for budgetary manoeuvre in the face of negative shocks,” it said.

With little political appetite to cut spending amid pressures to fund cleaner energy, support ageing populations and bolster security, the “risks to the debt outlook are heavily tilted to the upside,” the IMF said.

Countries where debt is not projected to stabilise make up over half of global debt and about two-thirds of global GDP.

Using a “debt-at-risk” framework, the IMF found that the level of future debt in an extreme adverse scenario could reach 115% of GDP in three years, almost 20 percentage points higher than in the baseline projections.

“This is because high debt levels today amplify the effects of weaker growth or tighter financial conditions and higher spreads on future debt levels,” it said.

The debt-at-risk metric for advanced economies has slipped from pandemic peaks and is now estimated at 134% of GDP, but it has risen to 88% for emerging market and developing economies.

While slowing inflation and falling interest rates are offering governments a window to get their fiscal houses in order, there’s little sign of any urgency to do so, the IMF said.

“Current fiscal adjustment plans fall far short of what is needed to ensure that debt is stabilised (or reduced) with high probability,” it said.

Source: The edge markets