The Singapore market continued to fall during the week of Nov 29-Dec 1, partly because of global events including the emergence of the Omicron variant, but it also fell partly due to idiosyncratic factors. Sea Inc’s weightage in the MSCI Singapore Index was raised to 50% on Nov 30, causing the Singapore blue chips to be re-weighted downwards to make way. Hence the sharp one-day fall which took the STI to 3,041.
Since then the Straits Times Index has stabilised, but the damage has been done. The STI has fallen below its moving averages and a support. It is now forming an ascending triangle. Generally this is a bullish continuation pattern. (In the STI’s case, the pattern is unlikely to indicate a bullish continuation.)
To negate any decline, the index needs to regain at least its 200-day moving average, currently at 3,136.
The next re-weighting for MSCI Singapore is likely to be in February when Sea Inc’s weight rises to 100%. By then, MSCI may make a statement about the inclusion of Grab Holdings Inc, which had an inauspicious debut, ending its first trading session down 20.5%. But it’s early days. Till then, we should see some stability with the STI attempting to regain its 200-day moving average.
Although the Hang Seng Index lost 314 points week-on-week to end at 23,766 on Dec 3, the rate of decline slowered considerably. This suggests that the HSI could find support shortly at 23,175, despite dipping below the twice-tested 23,900 level.
The chart pattern shows that HSI in a downtrend, hence any support is likely to be temporary and lower levels are likely this month, as indicators are weak. Quarterly momentum may continue to inch lower in negative territory. ADX is rising and DIs are negatively placed, an indication of a downtrend. Since the HSI’s rebound high of 25,713 on Nov 16, the index has lost 1,947 points or 7.6%. The 50-day moving average (currently at 24,912) is likely to act at as a resistance line.
See also: STI steadies despite overbought US markets and rising US risk-free rates
