A swift rebound after hitting 7 week low
After ten days of decline, Singapore’s second largest bank UOB finally saw daylight yesterday. Rebounding 1%, UOB closed as the third biggest index mover in the STI. Prior to yesterday’s climb, UOB was trading at its lowest level since 10 July.  Its close at $20.26 yesterday however, took the stock back above its 200-day moving average price of $20.13. UOB’s RSI was at 29.4 after the market sell-off on Wednesday, suggesting that the stock may be oversold.

Expansion into ASEAN markets

Last Wednesday, UOB unveiled its new advisory business in Jakarta as part of the bank’s long term plan to double its lending to companies entering the Indonesian market. UOB had previously launched advisory units in other parts of Asia, including Kuala Lumpur, Bangkok and Shanghai. According to a Financial Times article on 21 Aug. The bank also plans to bring its advisory business to Hong Kong and Ho Chi Minh City next month, followed by Yangon by the end of this year. UOB’s foreign advisory units will serve as a “one stop shop” for clients now using Singapore as a regional base to expand in the ASEAN region.

Currently, the value of loans to Chinese companies in Southeast Asia represents approximately 25% of UOB’s cross-border loan portfolio last year, marking a significant increase from just 3% in 2010. UOB is therefore hoping that the recent launch may help the bank attract more businesses operating in this region, including Jakarta.

Investors who are keen on UOB may consider the new warrants that Macquarie has listed this morning. They have strikes close to UOB’s closing price of $20.26. Investors with a bullish view on UOB may buy into the call warrants for the potential to profit from a continued stock recovery, while investors with a bearish view on the stock can consider the put warrants.

Source: Macquarie Research - 30 Aug 2013