■ STI – August correction comes early, choppiness between 3150 to 3250 in the week(s) ahead
■ Results season update –FY15F and FY16F revised down by 1.3% and 1% thus far; O&M and consumer stocks lead downgrade
STI’s decline below 3300 to 3200 last week was ahead of our expectations for weakness in August. The funds outflow can be contributed to macro uncertainties and a lacklustre earnings season so far. Currently, there has been a moderate but ongoing cut to earnings. Assuming the downward revision is not significant for the reminder of the reporting season, STI should hold at the 3150 level in the worst case. Meanwhile there is immediate support around 3200 but bounces for now should be capped at the downside gap at 3250. Thus, we expect choppiness from 3150-3250 in the week(s) ahead.
Wired WeeklyAttention continues to be on the 2Q results season that is currently panning out, with 40% of the stocks in our coverage reporting corporate results. As of now, earnings for FY15F and FY16F have been revised down by 1.3% and 1.0% respectively. The cut in earnings were mainly from Oil & Gas (Keppel Corp and SembCorp Marine) and Consumer stocks (Osim and SMRT).
Key results for this week include SembCorp Industries, StarHub, Wilmar, ComfortDelgro, City Developments, ST Engineering and Olam.
Expect index heavyweight banks to lend support to the STI at the two near-term support levels at 3200 and 3150. Between the 2 banks, our preference remains on OCBC with stronger earnings at OCBC-WHB while the potential reach of its differentiated non-interest income franchise should support valuation. (Read Report)
Source : DBS Group Research