■ STI – ECB QE speculation to fuel rebound towards 3150 by November before stalling
■ Liquidity driven rise - Banks, property stocks & SGX
Hopes of more QE in December by the ECB and the PPOC’s rate cut over the weekend helped keep the rebound alive as short-term liquidity improves. Expectations for the Fed to start raising rates have also taken a step back.
For the STI, we now see the possibility for the current rebound to extend moderately further towards 3150 (instead of 3100 ‘overshoot’), which coincides with the 50% upward retracement and closer to the 200-day exponential moving average. Near-term support is around 3045, firmer at around the 3000 level.
It’s a short-term liquidity driven rally rather than an improvement in economic fundamentals or corporate earnings outlook. Thus, we view the current recovery as a counter-trend rally and are watchful for a stall should the STI head closer towards 3150 over the next two weeks. That is, ride the trend now but further gains towards 3150 will open up more profit-taking opportunities.
SGX shares should be underpinned by the near-term liquidity improvement. There is upward bias to $7.89 on charts.
We look for index heavyweight banks, property counters City Developments and CapitaLand to tilt the index higher towards 3150. Technically, OCBC shares should head for $9.75, which is also not far away from our fundamental $10 TP. UOB’s immediate resistance is at the 38.2% upward retracement level at $20.86.
For CapitaLand, we see further upside capped at $3.30. City Development looks on target to test the 38.2% upward retracement level at $8.50 (refer to Wired Weekly dated 19 Oct). Beyond that, the 50% retracement is at $8.78.
The 3Q results season has been uninspiring thus far with the usual in-line results from S-REITs while rig builders reported weak results
. This is an important week for corporate results with banks OCBC and UOB, SMRT, SembCorp Industries and Global Logistics Prop reporting
. (Read Report)
Source : DBS Group Research
Labels: Equity Strategy