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Buying OCBC. DBS and UOB next? Too big to fail!

Tuesday, March 14, 2023

Just a few days ago, I talked to myself about DBS, OCBC and UOB.

Specifically, I talked to myself about their charts.

Although fundamental analysis tells us that DBS, OCBC and UOB make for relatively safe investments, Mr. Market is mental and does not care about fundamentals at times.

This is why I said I would wait for Mr. Market to go into a depression before I increase my investments in DBS, OCBC and UOB.

Over the weekend, I produced four YouTube videos on the ongoing U.S. banking crisis.

This morning, in addition to a video on SATS' rights issue, I produced another video on the U.S. banking crisis.

Although the U.S. regulators have taken steps in an attempt to calm the public, we are still seeing a sell off in banking stocks.

Obviously, Mr. Market is not convinced that all is well.

Although Mr. Market is mental, conventional wisdom tells us that Mr. Market is always right, even when he is being irrational.

The market can stay irrational longer than we can stay solvent.

Remember that?

Despite a statement from the Monetary Authority of Singapore declaring that Singapore's banks are well capitalized, DBS, OCBC and UOBs' share prices are plunging.
Source: MAS

We could be seeing the proverbial blood in the streets as the common stocks of all three local lenders are now trading below their 200 days moving averages.

With the momentum oscillators negative and no sign of a positive divergence for DBS and UOB, I expect the stock prices of these two banks to suffer more than OCBC's.

OCBC is in a slightly better position as the MFI, a momentum oscillator which I favor, shows a higher low even as the stock price hits a lower low.

So, I placed an overnight BUY order for OCBC at under $12 a share and it was filled a few moments ago.

From a valuation perspective, OCBC is also a better buy than UOB or DBS as it trades at a very small premium of about 5% to its NAV.

Approximately, UOB trades at a 15% premium while DBS trades at a whopping 45% premium to NAV.

To be honest, I would not be surprised if stock prices continue falling from here.

Although I increased my investment in OCBC today, it is only a nibble and a very small one too.

The bearish sentiment is very strong right now and it is probably a bad idea to fight Mr. Market.

Too much dust in the air.

Still, the dust will settle at some point.

So, don't do a Chicken Little.

The sky is not falling.

I am staying invested in DBS, OCBC and UOB as they are unlikely to implode like Silicone Valley Bank did.

If the stock prices of DBS, OCBC and UOB continue to decline, better entry points should present themselves eventually.

I hope I would have the resources to add to my investments then.

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CL said...

I searched through your past posts on momentum oscillators and saw that you are using Money Flow Index, MACD, RSI, and Chalkin. Most of the time it is MACD, but for this post you chose MFI. Could you help me to understand why is MFI preferred over MACD for OCBC?

AK71 said...

Hi CL,

Wow! You did a CSI on AK's TA. ;p

I usually use MACD to get a quick feel of the momentum.

I use the RSI and MFI to see if a counter is oversold or overbought.

I use all 3 to check for divergences.

I usually favor MFI over RSI and MACD when I want a more accurate picture of sentiments.

This is because the MFI takes into consideration price and volume while RSI and MACD only look at price.

We can chat more about how I use TA on 10 May if there is a demand for the topic. :)

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