LIFETIME MEMBERSHIP What an ambush! It seems to me that the big boys had staged a sneaky ambush on OCBC share price (SGX: O39). From a high of $12.46 on 10 August, OCBC share price collapsed by 7.3% to reach a low of $11.55 on 27 August. The spectacular fall of OCBC share price within the span of two weeks certainly caught many investors by surprise. To make matters worse, the correction of OCBC share price was the worst among the three banks (DBS shares fell by 5.0% while UOB shares fell by 4.7%).
Looking back, the lifting of dividend restrictions by the Monetary Authority of Singapore (MAS) had provided plenty of fireworks for all three bank stocks, including OCBC share price. Subsequently, the OCBC’ stellar 1HFY2021 financial result pushed OCBC share price to a high of $12.46. Then again, Man proposes, God disposes. Despite the tailwinds, the big boys decided to pull the rug on OCBC share price.
For four consecutive weeks, OCBC has been in the top ten institutional net sell list. In the week of 26 July, big boys net sell $30.5 million worth of OCBC shares. In the week of 2 August, $52.8 million worth of OCBC shares were net sold. In the week of 9 August, $74.4 million of OCBC share were net sold. This is also the week that saw OCBC share price fell the steepest – from $12.46 to $11.90. In the week of 16 August, the selling continued, with $58.2 million shares being net sold.
The embattled OCBC share price triggered the management to embark on a series of share buybacks from 17 to 25 August. As of 25 August, a total of 11,883,100 of OCBC shares had been purchased from the market. In spite of the massive share buybacks, OCBC share price continued its slump to reach a low of $11.55 on 27 August. What could be causing the crisis of confidence in OCBC share price and is it a good opportunity to accumulate this counter? In this article, I will share my insights on the outlook for OCBC share price for the rest of 2021.
Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. I am vested in this counter (holding 6000 shares at an average OCBC share price of $12.38), so my views on OCBC share price may be biased.
OCBC share price so bad its good?
Although the share buybacks will provide nice support for OCBC share price, they are unsustainable if the bank is unable to deliver good financial results. In the 1HFY2021 results, the bank’s net profit dropped 23% on quarter-to-quarter basis due to exceptionally strong performance in first quarter. In view of this, institutional investors must be concerned about the earnings momentum in the next two quarters. The concern is valid as OCBC recorded the worst quarterly decline in earnings among the three local banks.
Indeed, on a quarter-to-quarter basis, the earnings momentum of OCBC seemed to have slowed. This could be attributed to the fallout from the Phase Two Heightened Alert. Many companies, especially the SMEs had been affected by the pandemic measures. In 1HFY2021, Singapore contributed 49% of operating profit to the bank, vis-à-vis 45% in 1HFY2020. Due to the concentration in Singapore market, the total allowances in 2QFY2021 of $232 million were above the $161 million a quarter ago.
Now that our population has reached a high level of vaccination and an endemic is in sight for Singapore, I do think that the worst is over for OCBC share price as the government is unlikely to roll out more measures that could hit SMEs. Given that Singapore is also gradually reopening its border through the Vaccinated Travel Lane (VTL), I foresee that Singapore economic growth will pick up pace in the latter half of the year. Thus, I expect OCBC’s 2HFY2021 result to surpass that of its 1HFY2021.
Looking back, OCBC share price nearly [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]LIFETIME MEMBERSHIP
Congratulations on your first step to becoming part of SG Wealth Builder community! For a one-off payment of $200, you can get full access to all the articles and enjoy the benefits of SG Wealth Builder Membership.
The full benefits and privileges of SG Wealth Builder Membership:
- Access to the latest premium articles of SG Wealth Builder
- Email notifications of latest blog articles
- Request for coverage on stocks, insurance and other personal financial topics
- Comment in articles
Note: After payment is made, you will be prompted with registration form to create your user-id and personal password.