On Aug 1, the Straits Times Index tested a six-month 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. This level is also 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 $1.70 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 support low of this indicator appears at around 1.01x book.

<span class='see_also_inread'><b>See also: <a class='gtm_see_also_1_inread' style='text-decoration: underline;' href='/capital/right-timing/mild-retreat-risk-free-rates-wont-help-equities-rally?utm_source=website&utm_medium=article&utm_campaign=ONPAGESEO'>A mild retreat by risk-free rates won’t help equities to rally </a></b></span>

https://s3.ap-southeast-1.amazonaws.com/www.theedgesingapore.com/public/usr/8azncs/ab10d3-WhatsApp-Image-2023-08-04-at-18.09.01.jpeg

Support for the Straits Times Index is at 3,230 as banks turn into dividend plays

Data is the new oil but is it as dirty?

'Transition credits' could sweeten deal for early retirement of coal-fired power plants: MAS, McKinsey paper

DPM Lawrence Wong appointed as GIC’s deputy chairman

Will the Rising Sun keep rising?

Support for the Straits Times Index is at 3,230 as banks turn into dividend plays

Related News

Highlights

Data is the new oil but is it as dirty?

Related News

The Fed has rained on the parade, but investing locally retains its positives

Equity markets dictated by rising risk-free rates

Straits Times Index moves above resistance as investor focus moves to FPL