STI to slip further following almost 0.5% loss

The index could fall towards its 3-week uptrend support, says OCBC Investment Research.

OCBC Investment Research said:

The more than 1% retreat on Wall Street overnight and the poor Nikkei start (down 0.4% now) are likely to dampen local sentiments this morning.

As such, the STI which fell nearly 0.5% yesterday could slip further towards its 3-week uptrend support and 2800 immediate support for a test today.

Should these supports be breached, we could see the index falling quickly towards the 2760 (minor trough) subsequent support thereafter.

On the upside, the immediate resistance is still pegged at the 2862 minor peak, as the next vital obstacle lies at the 2900 key support-turned-resistance.

IG Markets Singapore meanwhile noted:

Traders have turned the focus onto the EU summit at the end of the week and there’s a feeling there could be more meat on the bones for how policy makers plan to stabilise the eurozone.

Up until now it has all been just rhetoric and bold statements but traders need more than just talk if they are to seriously consider exposing themselves to more risk in Europe.

As European banks continue to be downgraded the flip side is that Asian banks look set to gain. More Western banks are pulling out of the region while struggling to acquire the same borrowing rates as Asian banks as investors demand a high price to buy their debt.

OCBC, DBS and UOB could benefit from the widespread downgrades among European banks which are likely to continue in the months ahead. Today OCBC will be keenly watched after announcing another round of share buybacks.

On the commodities front, US crude oil edged up slightly with expectations of tropical storm Debby disrupting supplies in the Gulf of Mexico.

The futures market point to weak opening for the STI this morning.