Banks have done their show and tell and STI is getting excited

Banks has done its show and tell last week and the general reaction towards the dip in performance and minor cuts in dividends are more positive than negative. This is because the share prices of banks have been heavily discounted from the highs before 2020 therefore many investors have been on standby until the 1H results are out. Coupled with the ever-climbing US indices, STI is showing signs of resilience at around 2530 levels. Check out this week’s special feature as well for a potential trade but as usual please dyodd.

STI – Updated Daily Chart

STI tested the support level at 2500 as mentioned in last week’s STI market outlook. Though the rebound is not substantial, it does show that STI is trying to recover as it regains confidence from positive profits from banks (major components of STI) who are crippled by razor-thin margins. Apart from that STI has also survived the dreadful announcement of other components such as Genting Singapore and Singapore Airlines which presented further challenges for the index.

STI – Updated Weekly Chart

As shown on the weekly chart, STI is still floating between two Fibonacci retracement levels signaling that buying and selling pressures are events thus far. Next week is a short week as our country celebrates National Day and our PM will deliver his national rally which could inspire investors’ confidence in specific companies which is in focus. Which brings us to this week’s special feature Singapore Airlines (C6L).

Special Feature – Singapore Airlines C6L

SIA is the symbol of Singapore’s pride as it serves the most number of foreigners from all over the world. Even though SIA is reporting a net loss, investors should recall that Temasek issued rights to supply enough cash equivalent to more than half a year of SIA’s usual annual revenue. This means that the Singapore Government believes in the future outlook of the company and will continue to offer adequate support for the company. In light of the National Day fever, SIA might spike up to $4 briefly before experiencing an immediate push back from sellers.

Author’s Call as of 9th August

• STI was supported again by 2500 and is currently supported by buying pressure for bank stocks
• STI closed resting above 9 days moving average but Friday closed on a red
• More companies have reported their performance for the 1H of 2020 and they are generally within expectation
• STI will likely continue an uptrend as more people buy bank stocks for the August Ex-Div however it is uncertain if that uptrend will go back into the parallel channels.

Author’s Call as of 2nd August

• National Day approaches and it is likely for some dressing to take place
• US GDP contracted significantly, however, FANG is still performing well in the midst of the pandemic
• SG Banks are unlikely to see the light at the end of the tunnel at the moment with interest rates fractured by the Feds
• Bank dividends are cut but bank shares did not dip farther than expected (equivalent to the cut in dividends)