Silicon Valley Bank’s selldown because of losses from its bond portfolio spooked Asian markets, in particular banks, which are heavyweights in the Straits Times Index. Hence, the STI fell 55 points week-on-week to 3,177 during the week of Mar 6-10.
The decline took the STI below its 200-day moving average at 3,216, a level that needs to be viewed as a resistance. In addition, indicators are weak, with quarterly momentum falling below its equilibrium line.
Among the banks, DBS is likely to find support at around $32.50 while UOB could move towards $27. On the fundamental front, the biggest rises in their net interest margins appear to be over as funding costs catch up. This is evidenced by the tussle for deposits with fixed deposit rates approaching 4%. In the meantime, the banks’ cheap Casa have fallen as their more expensive fixed deposits rise. So far, their bond portfolios have not had too large an impact on their net asset values. In addition, the local banks remain very liquid as evidenced by their liquidity ratios.
As a result, they should be able to rebound once they enounter their supports. The STI’s support appears next at 3,140 to 3,150.
In the meantime, yields on 10-year US treasuries retreated to 3.85% as at Mar 9, down from 3.98% a week ago. Yields on 10-year Singapore Government Securities have also fallen, to 3.23% as at Mar 10, down from 3.40% a week ago. That in itself maybe a thin silver lining ending a turbulent week.
