STI likely to maintain current 2,700–2,835 range: DBS

SINGAPORE (May 23): DBS Group Research is maintaining its short-term view for the Straits Times Index (STI) to remain in the 2,700–2,835 range, adding that possibilities of a rebound will be impeded by US rate hike-related concerns, the June 23 Brexit referendum, weak corporate earnings and a slow economic outlook.

In a Monday report, the research house highlights that if the current correction continues beyond the crucial 2,685 level, the downtrend “should extend further to 2,600 before finding support”, advising investors to watch Asian currencies closely given their close correlation with equity markets, especially since the next US rate hike is likely to occur at either the June or July FOMC meeting.

The bank’s technical analysis for Asian currencies sees a short-lived respite for equities, stating that while “the recent rebound in the USDSGD should find near-term resistance at 1.39 and a brief pullback is possible”, “Asian equities could enter another volatile period if the USDCNY eventually rises above its January high of 6.60 towards 6.80”. This is especially since USDCNY has a significant 41% weight on the regional currency index ADXY.

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