Meanwhile, valuation remains attractive at between 10.2x 12-month forward earnings as investor sentiment stays cautious, says DBS. This is because of the economic slowdown in China, which partly led to a 20% y-o-y drop in non-oil domestic export numbers for both July and August. A poll of economists by Bloomberg indicates a consensus of 3Q2023 growth of 1% q-o-q.
The Straits Times Index (STI) is likely to stay rangebound between 3,150 points and 3,300 points amid ongoing “sideways volatility” which is in line with seasonal trends, says DBS Group Research. The three banks, which make up nearly half of the index’s weight, will lend near-term support to the STI at 3,155 points and 3,200 points, given how they will benefit from the “higher for longer” interest rates regime.
However, there is near-term resistance in the coming weeks at 3,300 points ahead of the 3Q2023 results reporting season, as investors keep an eye on inflation trends and also weigh how effective China’s latest policies can be in dragging the world’s second-largest economy out of its doldrums.
