Technical indicators

The Straits Times Index (STI) has been heading south since the beginning of this year and has lost approximately 4.9% to date. The benchmark index for Singapore hit an intra-day low 2,953.01 on 4 February when trading resumed after the Chinese New Year holidays. The index rebounded the next day, following an upward movement in the US markets.

The STI’s Relative Strength Index (RSI) was at approximately 23 on 4 February, below 30, an indicative level which suggests that the index may have been oversold.

Closing at 3,013.14 on 7 February, the STI has rebounded 2% from the low on 4^th Feburuary. The index is also trading below its 50 and 100-day moving averages of 3,104.79 and 3,147.26 respectively.

Singapore banks - laggards among constituents year to date

OCBC bank is the biggest laggard among the constituent stocks, contributing to more than 28 points of the index’s downside movement thus far. According to a report published by Macquarie Equities Research (MER) on 27 January, they view the acquisition of Wing Hang Bank as a negative for OCBC share price. Apart from OCBC, the two other local banks are also among the top three biggest laggards among the index constituents, with UOB and DBS contributing to more than 18 points and 15 points to STI’s downside movement respectively.

Other major blue chip names, including Singtel and Keppel Corp are also among the top laggards, sending the index lower by more than 12 points each.

Leading movers

On the flip side, Jardine Matheson and Hong Kong Land are the only two constituent stocks which traded positively this year. Jardine Matheson and Hong Kong Land finished at US$52.95 and US$6.01 respectively on 7 February, representing a year to date gain of 1.2% and 1.9% respectively.

Investors with a bullish view over the STI may consider the call warrant that Macquarie is listing this morning while investors with a bearish view may consider the put warrant, which gains value when the underlying index declines.

Source: Macquarie Research - 10 Feb 2014