On Tues, June 11, the Straits Times Index broke above the three-times tested 3,240 level indicating an upside of 4,000 which. If attained, would be a new high and above the old high of 3,831. The upside represents potential and it’s a bit difficult to conceive what could drive the STI to these heights - if at all. The banks would have to underpin any move to new highs. The main trigger for the STI’s breakout is the interest rate cycle, and of course, the banks.  If United Overseas Bank fulfils its upside of $32, DBS Group Holdings heads to $40 - analysts have this as a target - and Oversea-Chinese Banking Corp regains the $13 level, then the local market barometer could indeed be within reach of at least its old high.

Interestingly, as an observation, when iFAST Corp announced its acquisition of a digital bank, BFC Bank on Jan 7, its share price fell from $8.17 on Jan 6 to $7.85 on Jan 7. It ended the week at $7.68 on Jan 14. However, when UOB announced the acquisition of Citigroup’s retail business in four Asean markets, its share price rose from $29.28 on Jan 13, to $29.90 on Jan 14. The STI rose from 3,205 on Jan 7 to 3,281 on Jan 14, for a gain of 76 points or 2.37%.

The Hang Seng Index is also attempting to recover, gaining 890 points in the week of Jan 10-14 to end at 24,383. At this level, the HSI is testing its 100-day moving average at 24,643. The index has already breached a minor resistance at 24,121. Since quarterly momentum has strengthened, and ADX has turned up as the DIs are turning neutral to positive, the HSI could muster the strength to break above 24,643. Volume has expanded and that is an additional plus for the Hong Kong bellwether.