During the week of June 19-23, the STI lost ending the week at 3,191, losing 69 points week-on-week. Immediate support is at 3,159, failing which support appears at around 3,157 to 3,159. Previously, the Straits Times Index rebounded to an intra-day high of 3,277 on June 16 which took it to the still declining 200-day moving average before retreating.
The banks continue to flounder somewhat despite risk-free rates staying stubbornly high. Yields on the 10-year US Treasuries remain at 3.74% which is above its 50-, 100-, and 200-day moving averages.
DBS Group Holdings D05 lost 39 cents on June 23. However, the stock gained 32 cents week-on-week. Technically, prices appear to be attempting to build a base formation. The bottom of the base is likely to be at $30.3. Short term RSI has formed a positive divergence with price. The top of the base is at $31.80, a level that is likely to be the resistance/ breakout level. DBS ended the week at $31.43.
According to Bloomberg Intelligence, DBS latest fine of $2.6 million adds on to the higher capital charges of 0.3% after previous digital outages, and 0.7% for the Citi Taiwan acquisition. Nonetheless, DBS’ earnings will still be able to add to its capital position. While DBS’ target CET1 ratio is 12.5%-13.5% for 2023, its CET1 as at March 31 was 14.4%. UOB’s CET1 ratio is 14%, and OCBC O39 ’s stood at 15.9%.
“ROE in fiscal 2023 might surpass 15%, led by further margins upside even as loan growth might moderate as well as a recovery in fee income, offsetting conservative assumptions about credit costs. The bank remains prudent in provisioning, even as we believe there's no material asset-quality stress in its books, with potential provision writebacks providing earnings upside. In the medium term, earnings may be fuelled by partnerships as well as acquisitions in India and China. DBS Finnovation may also potentially unlock the value of its digital initiatives and digital-asset exchange,” Bloomberg Intelligence says. In addition, DBS’ own management has mused over the potential IPO of DBS’ remittance business.
DBS and the other two banks are the largest stocks on the SGX, and clearly influence the direction of the STI.
See also: STI’s upside from breakout remains valid as risk-free rates fade, but stay watchful for FOMC
