Quek Leng Chan’s most recent purchase of a mere 27,600 GuocoLand F17 shares on March 15, and a further 98,700 on March 4, and 2,100 on March 14, lit something of a fire beneath the share price. Price action has remained resilient, and the chart is looking interesting. Quarterly momentum has broken above its equilibrium line. The resistance-breakout level of prices out of a base formation is at the confluence a twice-tested resistance at $1.50 and the declining 200-day moving average at $1.49. A breakout – which would require a lot more volume than is currently present – would indicate an upside of $1.80.
Although GuocoLand is trading at a discount to its net asset value of $3.83, the developer is likely to complete Meyer Mansion, Midtown Modern, and Midtown Bay in 1H2024. Of these, only Midtown Bay is not substantially sold. GuocoLand has a June year-end and would be able to collect the monies and buoy net profit from these developments as keys are handed over to buyers
In the meantime, to smoothen out the lumpiness and volatility of its development income, GuocoLand has been pivoting to investment income via Guoco Tower and Guoco Midtown. The latter achieved committed occupancy of 92%. Tenants are still fitting out so there may be complimentary rental periods. Guoco Tower and 20 Collyer Quay are mainly full with committed occupancy of 98% each.
Since some 75% of GuocoLand’s assets are in Singapore, it may not suffer fair value revaluation declines like some of its peers, despite its expense cost rising by 87% y-o-y in 1HFY2024 for the six months to Dec 31, 2023. No surprise then, that GuocoLand’s share price performance is better than peers, and this is also evident technically, based on relative strength comparative.
See also: STI continues to move sideways as ominous signs develop in US Treasury yields
Elsewhere, the Straits Times Index ended the week of March 18-22 almost 40 points higher week-on-week as a result of some buying and/or short covering of Singapore blue chips, in particular the banks. The Federal Open Market Committee (FOMC) meeting appeared to be steering the world into believing that the Federal Funds Rate is likely to be cut three times this year. It is at 5.25-5.5%.
If so, the interest rate environment coupled with still low credit costs and resilient asset quality could underpin the local banks' performance. More than that, market sentiment has improved which could mean that wealth management gets back on the front foot for the banks. Fees from wealth management moderated in 2023 because of elevated interest rates as the wealthy chose to lock in higher fixed deposit rates or move into T-bills.
See also: STI steadies despite overbought US markets and rising US risk-free rates
Based on the STI's chart pattern, short-term moves are likely to remain rangebound. As the index approaches the top end of the trading range at the twice-tested resistance of 3,250, it could call time on the immediate rally. Support has been established at 3,100.
A break above 3,250 would be challenging at present as this would require volume to expand considerably. The STI’s quarterly momentum remains in positive territory, but annual momentum isn’t quite in the right position to support a breakout.
Charts from Maybank
