STI currently is on an uptrend or probably what most terms as Bear Rally. Since
achieving an intra-day low of 1,455.47 2 weeks ago, STI closed 1,596.92 on 20th Mar 09,
up 141.45 points or 9.72%. Normally for a Bear Rally, it is possible to rally for an upside
of 20% to 30%. With that as a guide, STI could possible rally to 1,746 to 1,892 level.
Most also believe market will be on an uptrend till May ( traditionally, market always up
from February till May in the past ). Presently, STI is very near the psychological
resistance level of 1,600 and once that is broken, should be able to see more upside.
However do note that since the rally from 1,455 till 1,596, the daily volume has been on
the low side ( average less than 1 billion/day ) and that could cap the upside for the time
being.
For a Bear Rally, Commodity, Bank and Property stocks will be leading the charge. With
crude oil price rebound to above US$50/barrel, Offshore/Marine related stocks could also
be in focus for the rally. A look at these stocks from their recent intra-day low price to a
possible 20% to 30% upside from that is as followed.
Stocks | Intra-day low | 20th Mar closed | +20% | +30%
--------------------------------------------------------------------------------
DBS | $6.42 | $7.75 | $7.70 | $8.35
UOB | $8.07 | $9.38 | $9.68 | $10.50
OCBC | $3.95 | $4.56 | $4.74 | $5.14
CityDev | $4.05 | $5.03 | $4.86 | $5.27
Capitaland | $1.70 | $2.03 | $2.04 | $2.21
Olam | $1.11 | $1.41 | $1.33 | $1.44
Wilmar | $2.69 | $3.22 | $3.23 | $3.50
NobleGrp | $0.98 | $1.09 | $1.18 | $1.27
KepCorp | $4.02 | $4.45 | $4.82 | $5.23
SembMar | $1.30 | $1.54 | $1.56 | $1.69
As can see from the above tabulation, most of the stocks' price level is very near to their
respective +20% upside and some even exceeded and heading towards the +30% level.
There are several factors investors need to be cautious presently.
1. Global fundamental of the economy has not turn better yet hence any rally will be a
typical Bear Rally as market has not shown any sign of bottoming at the moment.
2. Stocks have been under heavy selling pressure since February and most of the stocks
are in deep oversold region, a rally is a typical technical rebound from oversold.
3. April will start the 1QFY09 reporting season and most of the companies will be
expecting to report a poorer earnings as compared with the previous quarter
announcement.
4. End of Mar 09 is 1QFY09 and potentially there will be window dressing for funds on
their portfolio and therefore from now till end of Mar STI is basis towards the upside
more than the downside.
5. US Government will be announced the Stress Test result in April to determine which
are the banks that failed the test and requirement bailout from the Government and also
which are the banks that need to rise cash ( but not required the aids from Government ).
This will be a testing month for financial stocks in general.
6. Presently, only selected blue chips are on a rally, broad market in general still weak in
particular S-Shares. As such, STI only managed rebound +9%. STI need a broad market
rally in order to achieve the +20% to +30% Bear Rally scenario.
A concern for investors at the moment is after the Bear Rally achieved its rebound
objective, market will continue its downtrend and this time potentially could head
towards the 1,200 level to do a possible final bottom. Therefore, investors are advice to
keep this option in mind.
