On Aug 1, the Straits Times Index tested a 2023 high of 3,373 before retreating. In a three short days, the index is down 81 points, ending at 3,372 on Aug 4. The Aug 1 high is within a few percentage points of Jan 27 high of 3,399. Important highs often act as resistances. As such the STI now has a couple of reference points as resistance levels.
During the week, short term indicators moved to overbought levels with smoothed short term RSI testing 82, a level that can be viewed as almost the top end of its range before retreating. This indicator has room to fall, and a test of 3,230 may coincide with its lower oversold region. The 3,230 level also represents the confluence of the 50-, 100- and 200-day moving averages.
The mild euphoria over the local banks’ results is probably over. For instance, even adjusted for UOB’s generous interim dividend of 85 cents, prices are lower ex-dividend. This scenario may be repeated with both DBS and OCBC which reported results - and generous dividends- on Aug 3 and 4 respectively.
The banks’ annualised dividends have their translated into attractive yields. For instance, OCBC’s 80 cents annualised dividends translate into a yield of 6.2%, as attractive as any REIT, yet coupled with growth, and retained earnings. The banks only pay out 50% of their net profit.
UOB’s annualised dividend of $1.80 translates into a yield of 5.9%, and DBS’ new 48 cents per quarter dividend provides its shareholders a yield of 5.5%. Among the banks, analysts have suggested that DBS had the strongest results with UOB and OCBC about even.
Since UOB announced results on July 27, its share price is likely to approach the mean of its price to book ratio. The oversold suppor low of this indicator appears at around 1.01x book.
See also: STI’s upside from breakout remains valid as risk-free rates fade, but stay watchful for FOMC
