Key Financial Trends of May 2024

In this month’s roundup of the latest economic, business, and financial news, Etihad Airways adds several banks to its planned US$1 billion initial public offering, Apple’s share price rises despite slumping iPhone sales, the UK exits a recession, and more.

ValueChampion Editorial Team

by ValueChampion Editorial Team on May 22, 2024

travel plane etihad airways

1. Etihad Airways Adds Banks to Planned US$1 Billion IPO 

United Arab Emirates flag carrier Etihad Airways has added several banks to its planned initial public offering (IPO) later this year. According to sources, the joint bookrunners include Abu Dhabi Commercial Bank and the Bank of America. This news comes on the back of Bloomberg reporting in March that ADQ already selected lead advisors for this IPO.

ADQ is an Abu Dhabi-based sovereign wealth fund which owns Etihad Airways. The lead advisors for the airline’s IPO are Citigroup, HSBC Holdings, and First Abu Dhabi Bank. If Etihad Airways goes public, it would be the first flag carrier among all Gulf countries to do so. This has raised questions about the United Arab Emirates’ other flag carrier, Emirates.

Sheikh Ahmed bin Saeed Al Maktoum, the CEO and Chairman of Emirates, stated: “It’s a Government of Dubai decision and they would be the one to tell me when”, during a media briefing in early-May. He added that he did not know if an Emirates IPO was being discussed by the government.

Etihad Airways’ case for an IPO is further strengthened by its first quarter results for 2024. The company recorded a post-tax profit of US$143 million from January to March 2024, 10 times higher than the same period in 2023. Additionally, its passenger traffic clocked in at 4.2 million in the first quarter of 2024.

What This May Mean For You

As part of the “ME3” airlines, Etihad Airways positions itself as a premium carrier. The bulk of its aircraft consist of wide-body planes, and it travels to over 70 countries around the world. Apart from Qatar Airways and Emirates, its primary competitors would be other full service carriers like Singapore Airlines and ANA.

Even among this list of carriers, competition is stiff. What’s more, operating a full service airline is capital and labour intensive. For example, Singapore Airlines’ revenue in 2023 was S$17.7 billion. However, its gross profit was only S$5.7 billion. With that said, should Etihad Airways proceed with its IPO, do your due diligence before investing in its shares.

Related: Investing 101: A Basic Guide to Stocks

2. Apple’s Shares Surge Despite iPhone Sales Dip

Apple devices grouped together
Source: Unsplash

For the first quarter of 2024, Apple recorded US$90.7 billion in revenue and a US$42.2 billion gross profit. However, these were significantly lower than its performance in the last quarter of 2023 because of a 10% drop in iPhone sales. On the bright side, the tech giant unveiled a US$110 billion stock buyback programme and 4% increase in dividends.

These two factors pushed Apple’s shares back into the US$180 range after dropping as low as US$164.08 in late-April. The firm’s latest stock buyback round has turned heads because this represents the largest repurchase in its history. Furthermore, Apple’s dividends have already been steadily increasing after its stock split in August 2020.

The first post-split dividend in 2020 was US$0.205 per share. Now, investors will be receiving US$0.25 per share. These two corporate actions have cushioned the blow of Apple’s weaker financial performance, as its share price demonstrated. Tim Cook, the company’s CEO, also assured investors that Apple is working on AI products.

Speaking of products, Apple unveiled its latest iPad Air and Pro models on 7 May. The iPads have not received a refresh since 2022, and the midrange model will miss this cycle of updates. Apple’s share price surged to US$184.90 that morning before retreating and closing the day at US$182.37.

What This May Mean For You

If you’re holding Apple’s shares, the company’s stock buyback means that you now own a larger portion of the firm. The value of Apple’s equity goes up while the number of owners are reduced. This also increased the earnings per share (EPS) ratio for Apple, which is a boon for investors tracking its quarterly and annual financial results.

The increase in dividends also boosts the value of Apple’s shares. Unfortunately, you’ll be hit with a 30% dividend withholding tax unless you’re a US resident. Also, do keep an eye on Apple’s iPhone sales as its competitors (Huawei, Samsung, etc.) are far from letting up in their efforts to gain a larger share of the smartphone market.

Related: How to Pick Dividend Stocks For Your Investment Portfolio

UK Exits Recession After Posting 0.6% Growth in Q1 2024

The UK in May 2024 after exiting a recession
Source: Unsplash

After entering a technical recession in end-2023, the UK bounced back one quarter later with a 0.6% GDP growth from January to March 2024. However, the Bank of England’s governor cautioned that the UK’s recovery was not strong. Conflicting data points also left interest rate cuts up in the air, with future employment and inflation numbers being key determinants.

According to the UK’s Office for National Statistics, the services sector grew by 0.6% in the first quarter of 2024 after almost a year of negative results. The transport and storage subsector led the way, experiencing its highest quarter growth (3.7%) since the third quarter of 2020.

This corresponded to the transport equipment subsector experiencing significant growth as well, up 5.7% in the first quarter of 2024. As a whole, the production sector grew by 0.8% from January to March. On the other hand, the textiles, wearing apparel and leather subsector fell for the sixth straight quarter.

When comparing real GDP growth among all G7 countries, the UK’s 0.6% is on par with Canada. France and Germany only recorded a 0.2% increase, although the latter country was down 0.5% in the final quarter of 2024. Lastly, as of the time of writing, Japan’s GDP data for the first quarter of 2024 isn’t available yet.

What This May Mean For You

The FTSE 100 Index reacted positively to this, jumping from 8,381.35 points at the start of the day on 10 May before closing at 8,433.76 points. Fortunately, if you’ve been investing in an ETF tracking this index – think the iShares Core FTSE 100 UCITS or Vanguard FTSE 100 UCITS – you would’ve benefited from its rally ever since late-October 2023.

Like its counterpart across the Atlantic Ocean, the UK has kept interest rates steady for close to a year. The Bank of England is optimistic that the UK can achieve continued economic growth while meeting its 2% inflation rate target this year. Ditto for the rest of Europe, with experts predicting rate cuts in the Eurozone and Sweden as early as June.

Related: 5 Reasons You Must Have an Emergency Fund and How To Build It

OCBC Announces S$1.4 Billion Offer to Take Great Eastern Private

Singapore's CBD at night
Source: Unsplash

On 10 May, OCBC announced that it offered S$1.4 billion to purchase the remaining stake in Great Eastern Holdings. OCBC aims to take Great Eastern Holdings private with this move, and it will fully own the insurer should this deal for the remaining 11.56% of its shares proceed. OCBC is offering S$25.60 per share.

After OCBC’s announcement was made, Great Eastern Holdings immediately requested for a halt in the trading of its shares. Trading closed at S$25.72 per share, the highest point since July 2019. The closest the company came to reaching this level again was in April 2021 before declining steadily across the next two years.

According to OCBC, it did this to “strengthen its business pillars of banking, wealth management and insurance, and optimise its capital to enhance shareholder returns”. The bank added that Great Eastern Holdings has contributed around 15% (S$700 million) to its annual net profit from 2013 to 2023.

This is similar to HSBC’s acquisition of AXA Singapore in 2022, where the bank looked to beef up its insurance and wealth management pillars in Singapore. At that point, HSBC also aimed to boost its revenues from fees, as banks were operating in a low interest rate environment.

What This May Mean For You

In early-April this year, OCBC’s share price set a new all-time high. When this news was published on 10 May, investors reacted favourably as well and its shares closed trading at S$14.12 that day. If you’ve been holding the bank’s shares, your portfolio would’ve been in the green, even if you invested at its previous all-time high price of S$13.78.

For investors who have Great Eastern Holdings’ shares in their portfolio, it’s a mixed bag. Because OCBC is set to take the insurer private at S$25.60 per share, you’re likely to take on a loss if you invested in Great Eastern Holdings from late-August 2017 to early-August 2019. This is discounting the dividend payouts you received, but it still isn’t ideal.

Related: How Business Owners and Entrepreneurs Can Raise Capital in Singapore

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