STI expected to open weak; DBS likely to be in focus

IG Markets Singapore says DBS may be in the spotlight after Indonesia’s central bank said it would cap single ownership in its banks to 40% for new investments.

IG Markets Singapore said:

In Asia, markets lost about 10% last month, with the STI giving up 7%. This sort of downturn may attract bargain hunters into the market this month, although they may be looking for bigger falls before they brave risk assets again.

On the commodities market economic bellwether copper continues to slide while oil futures fell 17% during May capping the biggest monthly decline for three-and-a-half years.

Brent crude slipped 0.5% last night to $101.61 a barrel which will please the Saudi Arabian oil ministry which had targeted a price below the $100 threshold.

WTI slumped 1.5% last night and trades at $86.53 as US employment data revealed more weaknesses in the economic recovery story.

On the local market, DBS may be in the spotlight after Indonesia’s central bank said it would cap single ownership in its banks to 40% for new investments. This will surely see the Danaomon bid scrapped with such tight restrictions.

Formula One is to put its planned IPO in Singapore in the pits for the time due to such choppy markets. Having been in pole position for a June listing the decision comes as no surprise given the flop Facebook saw when it completed its IPO in similar conditions.

The futures market is pointing to a weak open for the STI this morning. Maybe the phrase about selling in May needs to be revised to include June, given the uncertainty ahead for global markets.

OCBC Investment Research meanwhile noted:

The weaker US indices and the poor Nikkei start (-0.7% now) could continue to weigh on local sentiments this morning.

As a recap, the STI retreated for a second consecutive session yesterday with a 0.4% lower close.

And with today's tone likely to remain more downside biased, the 2763 key support could be put into jeopardy today. A break below this base will also mean a bearish break of its 3-year uptrend support.

Beyond the 2763 support, the subsequent minor support lies at the 2730 resistance-turned-support. On the upside, 2831 is still the immediate resistance (recent minor peak) to overcome, with the subsequent obstacle lying at the 2900 key support-turned-resistance.