The STI has begun an uptrend as it finally breached the 2400 support level this morning. This reversal of a downtrend signals an appropriate time to purchase counters that have been posting consistent profits and have healthy cash flow, in other words, counters with high intrinsic value.
Financial and property counters are expected to lead the uptrend, with local banks likely to benefit from the pullback of foreign banks from corporate lending and also the recent suspension of several bond markets has shifted business to direct bank lending. In the property market, recent boom in sales of private residentials has been due to price cuts from developers.
The jittery fluctuations in the STI between 2200 and 2300 the past 2 weeks due to apprehension of the investors have been somewhat mild yet stable relative to the weak US market. Trading volume had been low, but sentiment is going north for this 2nd quarter with a rise in GDP forecast and fewer job losses.
The moving average convergence divergence (MACD) registered a bullish divergence yesterday, similar to the ones on 13 March and 4 May, when rallies followed. If this uptrend persists, the index will likely to hit 2500 by the end of next week, higher than the last attained peak of the rally that happened last month.
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