In Feb 28- Mar 3, the Straits Times Index lost 50 points week-on-week to end at 3,232, a level that is near the support area provided by the 100- and 200-day moving averages. In addition, short-term RSI is near the low-end of its range. As the market becomes increasingly oversold, a respite from the decline of the past 10 trading days could materialise.
Yields on 10-year US treasuries rose to 4.06% on Mar 2, the highest level this year. Similarly, yields on 10-year Singapore Government Securities ended the week of Feb 27-Mar 3 at 3.4%, marginally off the high of 3.44% on Mar 2. The one year high was at 3.61% in Oct 2022.
The rebound in yields on 10-year SGS, which is the equivalent of local risk-free rates is negative for equities as higher risk-free rates cause cost of capital to rise. To compensate, equity prices fall.
A few other areas are at work. The local banks, which carry the heaviest weights in the STI, are viewed to be fairly valued, in particular as the largest gains in their net interest income growth may be behind us. Net interest income may continue to grow, but the rate of growth is unlikely to match the double digit gains experienced in 2022.
