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Brokers' take: Expect 'gap-down' day in Singapore markets

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DBS Group Research: Expect another gap-down day for the benchmark Straits Times Index, in reaction to the Dow Jones Industrial Average falling more than 500 points last Friday.

DBS Group Research: Expect another gap-down day for the benchmark Straits Times Index, in reaction to the Dow Jones Industrial Average falling more than 500 points last Friday.

The Asian and emerging markets' equity market correction has now spilled over to the developed markets of the United States and Europe, as well Japan.

The US equity market had been on a multi-year bull market and the correction is long overdue given its valuation and slowing corporate earnings growth. The S&P 500 has fallen to our stated short-term downside level at 1,970.

While a temporary technical bounce is possible, it should be capped at slightly above 2000.

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Technically, we see eventual downside to the next important support at 1,880.

The 2,900 level should provide temporary support for the Straits Times Index should it be tested today. But bounces are likely capped given ongoing macro uncertainties and the series of technical "downside gaps" in recent sessions.

OCBC Investment Research: Further sharp losses on Wall Street on Friday and the weaker US index futures do not bode well for the local bourse this morning, especially after the STI broke below the key 3,000 support on Friday.

As before, once the 3,000 support gives way, we could potentially see the index slipping further towards the 2,800 region.

Having said that, the pace of the pullback has taken us by surprise, as the market has been oversold since early August.

While we peg the immediate support at 2,950, we think that the correction today would probably slow around 2,860 or even 2,800. But a stronger support is likely found around 2,698 (early June 2012 low).

On the upside, we peg the initial key hurdle at 3,000, ahead of 3,053.

The gloomy outlook comes on the back of the plunge in US stocks last Friday, capping a week of carnage that sent the Dow Jones Industrial Average into correction territory as fears about China's economy and global growth spurred heavy selling.

All 10 industries of the S&P 500 closed lower, with information technology (-4.21 per cent) and energy (-3.47 per cent) leading the declines. OCBC said the S&P 500 index retreated 5.77 per cent for the week.

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