Bulls And Bears

Investors shun risk ahead of Christmas

Amid worries over Fed rate hike, firms with debt-fuelled acquisitions take a hit

'Tis the season for giving, yet investors aren't 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 that have pursued debt-fuelled acquisitions were notably punished, perhaps on the back of worries over Fed rate hikes next year.

Lippo Malls Indonesia Retail Trust, a high-yield real estate investment trust (Reit), is now sinking on the back of a Thursday Moody's note that its debt is on review for a downgrade to "junk" status.

The rating agency cited reasons like weakening financial metrics and a refinancing hurdle next year.

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

First Reit, a Lippo-linked Reit which 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.

Another stock hit was Thai Beverage (ThaiBev), which announced a US$4.8 billion (S$6.5 billion) acquisition of a stake in Vietnam's largest brewer, Saigon Beer Alcohol Beverage (Sabeco), earlier in the week.

ThaiBev finished trading down 2.5 cents, or 2.7 per cent, to $0.91, on heavy volumes of over 63 million shares. It hit a two-month low.

ThaiBev's net gearing will soar from 0.23 time now to more than one time, analysts project.

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.

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

The controlling unitholder 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 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 doesn't do anyone much good.

A version of this article appeared in the print edition of The Straits Times on December 23, 2017, with the headline 'Investors shun risk ahead of Christmas'. Print Edition | Subscribe