Two of the key support levels for the STI that are quoted in the market place are the 3300 level and the 3000 level. We had highlighted the 3000 level as the worst case downside support level in our 2008 strategy report, stating that it represented 7 year mean price to book valuations.
Yet, the way, we see it, there is very little in charts that suggests that the index could head down to the 3000 level in the near term. The low volatility in banking stocks is one of the reasons why we believe that a near term low is in the making.
Additionally, some of the stocks in the sector are trading near previous lows on low volume. The STI has so far corrected marginally below 3300, yet there is no major sign of panic and the index's performance thus far is encouraging. Even, if the index breaks below the 3300 level, we think there will be secondary supports.
Watch out also for a marginal decline in the HSI towards 26600. If HSI registers a marginal decline and rebounds, then the odds are that an important low could have formed for both the STI and the HSI.
All said, we still maintain the view, that the present decline is a buying opportunity and we highlight some of the laggard index stocks.
1. Capitaland- Stock at $5.95 is trading at a 1 year low and off by 30% from May 2007 high of $8.50. Support at $5.70-5.80
2. City Dev- Another laggard. 2007, high was $17.90. At $12.56, stock has declined by 30%. Support at $12.20-12.20.
3. SGX- 2007 high was $17.20. Prior lows in 3Q07 and 4Q07 were in the $12.00-12.10 range. Stock has declined by 29% at present $12.10 level. Support is at current levels. If the $12.00-12.10 range breaks stock could head towards $11.60.
4. SembCorp Marine- Stock had fallen to a low of $3.82 from a high of $5.70. At current level of $4.23, the stock is showing positive relative strength to the STI over a 5 week period. Support level is at $4.14. Resistance is at $4.52
5.DBS- Peak in 2007 was at $25.00. From that level, it had corrected towards $18.70-19.00, 4 times. This represents an important floor. Stock is currently at $20.13. Volatility has been relatively lower as opposed to 3Q07 and 4Q07.
Recommend accumulating between $19.60-20.00
6. CapitaCommTrust - The stock reached a high at $3.32 in 2007 and since then it has corrected to a low of $2.11. Current price stands at $2.14. DPU for FYO8 is projected at $0.097. This provides a yield of 4.5% as at current $2.14. Next support level is stands at $1.95-2.00 range. Our fundamental price target is at $3.04.
7. CapitaMall Trust- Stock had fallen from a high of $4.32 in June 2007 to a low of $2.96 in August. At present the stock stands at $3.18 and is consolidating between $3.10-3.52. At $3.18, the stock offers a yield of 4.5% based on consensus DPU of $0.146.
8.SIA- Stock has fallen from a high of $20.00 to a recent low of $16.30. This represents an 18.5% decline. At present $16.70, the stock is trading at 1.3x historical P/B ratio. Support is at $15.80-16.00.
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