The index has managed to move to test the 50% retracement level of 3,350. The speed at which this was covered suggests that the index may be able to test the breakdown level 3,420.
The recovery was led by the local banks, which together account for around 40% of the STI’s weightage. Among them DBS Group Holdings , Oversea-Chinese Banking Corp and United Overseas Bank rebounded despite the interest rate cycle having peaked.
Although the Federal Funds Rate is set to start declining, the local banks have said non-interest income could grow by double digits this year and in 2025 to offset the decline in net interest income. Despite these assurances, the banks may be somewhat volatile, in particular now that both OCBC and UOB are trading ex-dividend.
The 10-year Treasury yield remains below 4% and was at 3.91% as at Aug 16, slightly lower than week ago levels of 3.94%.
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