Singapore Airlines (SIA) was the best performing stock in our portfolio (see Tong’s Portfolio), rising some 10% week-on-week during the period of Feb 26 to March 3. Technically, there are reasons for SIA’s price surge. Its share price broke out of a multi-month base formation in the last week of Feb, around Feb 24. At the same time, prices broke out of a six-times tested resistance, on a notable expansion in volume.
Quarterly momentum looks a trifle uncertain on the daily chart, but a clear positive divergence between price and annual momentum coupled with an upturn by annual momentum has developed, and this provided SIA with primary strength. In January 2020, SIA had broken down below $6.82 or thereabouts. The breakout on Feb 24 this year indicates a price target of just $5.63. Prices rarely rise in a straight line accelerated up move. It is more than likely that SIA retreats to end the week on March 5, lower than $5.21, perhaps to the roundophilic level of $5. However, prices are likely to continue rising to at least $5.63 initially, and possibly onwards to $6.82. The breakout level was at $4.50.
Fundamentally, the Covid-19 vaccines are proving effective. Travel could start up sooner than expected, perhaps by the end of this year. Airlines have cut capacity, some low cost carriers are struggling to survive. SIA could benefit, and equity markets always look ahead, months ahead.
Market watchers are beginning to ask when — not if — Singapore Press Holdings (SPH) will list its student dormitory portfolio as a REIT. Property fund managers refer to student dorms as Purpose Built Student Accommodation or PBSA. SPH first invested in a PBSA portfolio in 2018. Since then it has acquired a meaningful portfolio of seven properties in December 2019, and a smaller portfolio in April of that same year. According to SPH’s 2020 annual report (the company has an August year end), its PBSA portfolio is valued (during Covid) at $1.4 billion, nearly all in the UK. If SPH is able to list its PBSA as a REIT — which was in planning in 2020 but scuppered by Covid-19 — then the erstwhile publisher will take a significant step to becoming an asset manager.
Just before the Lunar New Year, Right Timing had indicated that SPH’s break above the top of a multi-month base at $1.25 indicated a target of $1.60. The subsequent move on Feb 23, clearing $1.25 decisively was accompanied by a surge in volume, and positive crosses between the 50- and 200-day moving averages. This move establishes support at the breakout level of $1.25.
Despite a temporary pause, the upside remains valid. It is a realistic target, given that SPH has fallen from around $2. A clear positive divergence has developed between SPH’s long-term annual momentum and its share price, followed by a recovery in momentum. This indicator is likely to support further advances towards as high as the 2020 breakdown level of $2.
See also: STI’s upside from breakout remains valid as risk-free rates fade, but stay watchful for FOMC
Right Timing was perhaps a bit too cautious on the technical outlook for the Straits Times Index. Positive indications on technical indicators are inevitably likely to be tempered by the volatility on Wall Street, with Nasdaq Composite and Nasdaq 100 particularly volatile. Now, the STI is testing at a one year high. The index broke down from 3,018 as Covid-19 turned into a pandemic and spread through the US in February and March of last year. These declines a year ago are likely to benefit annual momentum which has — mathematically at least — turned up and is rising. Two-year momentum has also turned up. On the other hand, quarterly momentum is neutral.
Directional movement indicators have bottomed. ADX has flattened at 18, and the DIs are neutral, suggesting that this indicator has the potential to turn positive. The next resistance is at 3,368 to 3,377, an area that was tested twice in 2019, but which the STI was not able to successfully challenge. Support is back at the rising 50-day moving average, currently at 2,925.
