The Straits Times Index had an awful week, falling 114 points to end at 2,423. The local market’s performance was highlighted by Bloomberg which reported that the STI was down 25% this year making it the worst-performing Asian equity market. Its underperformance was blamed on the preponderance of cyclicals in the index, that is, banks, property and, of course, REITs. Furthermore, on Oct 30, REITs in general fell because of concerns over a steepening yield curve.
See also: Short term bounce aside, STI's downdrift likely to persist
In general the idea of rising interest rates tend to garner knee jerk negative reactions from property stocks and REITs. Interestingly, the banks were not able to step up and buoy the STI.
On Oct 30, not a single STI component stock rose -- all of them fell except for Yangzijiang Shipbuilding which was unchanged. Undoubtedly, markets are generally skittish because of second and third Covid-19 waves in Europe and the US.
Technically, the STI is now entrenched beneath its 50- and 100-day moving averages. Directional movement indicators are negative with ADX surging, and the DIs negatively placed. Short term stochastics is falling, and quarterly momentum has fallen below a sideways range and its own moving average.
Volume expanded as the index fell, suggesting some selling pressure, and indicating that the STI may decline further in the week of Nov 2-6.
Since selected property stocks are approaching their Mar 23 lows, it is possible that the STI tests its Mar 23 low of 2,233. Immediate resistance is at the declining 50-day moving average currently at 2,510.
