DBS on STI

Feb 24 2006
ST Index (2,435.58) – The Straits Times Index regained 7.7 points Trading volume decreased
marginally from 1.19bn to 973m with 236 losers to 284 gainers. We think that the indicators on
our index look weary and over-bought, hence, we expect the index to continue trending south,
correcting over the next few days. The downward glide will likely be slight due to the upward
momentum coming from the bank and telecommunication stocks to support the market from
diving. Our current forecast on the probable downtrend remains intact and it cannot be
terminated unless the index breaks and closes above its previous high of 2,451.90. Hence, we
expect our next support level to be at 2,380. However, for the index to go lower towards its
immediate support level, it needs to penetrate below the 2,400 levels trigger point. In the short to
mid-term view, we still expect our index to move gradually towards its immediate resistance level
of 2,450 followed by a likely breakout towards its next resistance level of 2,475 over the next 2-3
week. For the moment, we advocate investors to stay out of the market for a short-term until the
market provides clearer directions. On the whole, we remain mildly bullish on the index for the
year with our year-end target set at 2,560 levels.