While US banks saw a string of positive numbers that had helped the financial sector select ETF (XLF ETF) to the highest level in over a month into late July, local banks may react more to the tune of the outlook instead. The latest introduction of additional property curbs, where the Additional Buyer’s Stamp Duty (ABSD) and borrower’s loan-to-value (LTV) ratio were both amended effective July, looks to cast some shadows upon the banks’ performance going into the second half. Little concerns are allotted to the non-performing loans’ (NPL) end though upcoming housing borrowings is expected to be dampened moving forward. From amongst the trio of local banks, UOB is widely known to have the highest proportion of its books accounted for by home loans, with levels that are reported to top one-fourth of their total loans, likely to suffer the biggest loss of confidence on this end. Watch any management guidance in relation to this change.
As things stand, the recent bout of macroeconomic factors including the trade tensions and the impact from the domestic property curb have brought prices down for all three local bank shares, away from their 12-month target price. That said, the string of brokers’ revision of late continued to reinforce their positive outlook for the local banks so do look to what guidance have to provide.
As the first to release its Q2 results, DBS Group Holdings Ltd. may be the best to capture the reactions, though the impact will likely ripple across the local banking sector. Prices have found support at the $25.84 horizontal support of late, which will likely retain its strength in the face of any further declines from here. On the upside, the $28.00 level is seen with prices struggling in the reversal as seen on the MACD. Outstanding earnings may still have the potential to send prices past the level, one to follow.
The 12-month target price is sighted at $31.81 according to Reuters consensus.