Dear readers, the Singapore Straits Times Index (STI) closed in the range of 3,160 yesterday. Since October 2020, when the STI was trading in the range of 2,400 to 2,500, the STI has been on the uptrend. Hence, looking at this the STI from the aforementioned perspective, the STI has done very well and investors would wonder whether there are any further potential upside for the STI.
If we look at the technical chart of the Straits Times Index (STI), the STI is near a resistance level of around 3,220; hence there is a likely upside of another 2% before the STI has to make a compelling move above the resistance for continual upside.
Next, based on the Price-to-Earnings (PE) ratio of the SPDR STI ETF, the Straits Times Index (STI) looks expensive to me. This is because the PE ratio of the STI ETF is now at 19.74. I would think that the PE ratio of the STI ETF has become higher as earnings of companies may have be eroded in view of Covid-19. Such a high PE ratio of 19.74 in today’s uncertain economy (given Covid-19) is not sustainable and I would think the STI has to head south for a more balanced ratio (around 15 in my opinion).
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