The banks are likely to remain volatile given the impact of a turn in the interest rate cycle coupled with a global economic slowdown. The local banks’ sensitivety to the Federal Funds Rate is lower than two years ago based on the recent spate of results. This is due to their asset-liability management including the management of their securities book. Should they extend duration or stay shorter term with higher yields? This is a judgement call that the banks need to make, but this could mitigate the impact of decline in interest rates on their net interest income.
Technically, DBS Group Holdings’ chart looks like the weakest among the banks, having fallen from a top formation. While prices are set for a rebound, the breakdown level of $35.00-$35.30 is likely to pose resistance. This is despite DBS’s management guiding for a single-digit growth in net profit this year putting DBS's net profit above $10 billion for the second consecutive year.
Although the FTSE REIT Index, which ended at 645 on Aug 8, has remained above the original breakout level of 620, it may fall below the 50- and 100-day moving averages both of which are at 642.
The 10-year Treasury yield which had touched a low of 3.8% rebounded to 3.96% as at Aug 9. The 4% level is likely to provide some psychological resistance. The breakdown level was at 4.22%.
See also: Straits Times Index shows signs of decoupling from the US by outperforming
