To The Moon

🚨Yesterday, the Singapore bank stocks experienced heavy selling, with OCBC losing as much as 4.4% intraday, while DBS and UOB both closed 2% lower

This morning, all three banks have opened in the red ( $OCBC Bank(O39.SI)$ -0.6%; $DBS(D05.SI)$ -0.9%; $UOB(U11.SI)$ -0.3%) as of 935AM, suggesting that the selling ahead of this week's earnings season may be slowing down

The apparent "de-risking" ahead of this week's earnings, starting with UOB tomorrow, DBS on Wed and OCBC on Thurs, may be due to recent headlines on net interest margin and wealth fee momentum concerns for all three banks given rate hike worries

📊In terms of valuation, UOB is currently the most attractive

Its forward price-earnings ratio of 11.6x is at a 30% discount compared to DBS' 17.9x and 24% discount compared to OCBC's 15.3x, based on Bloomberg stats

While its price-to-book ratio of 1.35x is also the lowest compared to DBS' 2.89x and OCBC's 1.98x

From a technical perspective, UOB is holding up better than the other two banks

Its Relative Strength Index (RSI) of 37.2 is not yet in oversold territory (defined as less than 30), compared to DBS' 24.8 and OCBC's 30.0 (based on Bloomberg data)

UOB is currently trading the closest to its 200-day MA of $39.57 compared to DBS' 200-day MA of $66.17 and OCBC's 200-day MA of $25.66

The 200-day MA is likely to serve as a key support level for all three banks

👀What will investors be looking out for in tomorrow's earnings for UOB?

According to Bloomberg consensus, analysts are expecting a 7% Q3 net profit drop to around $1.37 billion

At the same time, analysts are expecting net interest income to stabilize, fee income to recover modestly, and loan growth to grow around 2 to 3% from the previous quarter

During its last quarterly earnings release, UOB shares had gained 1.2% on the day of its result, but gave back all gains to close 0.6% lower the next day as the market focused on its non-performing asset (NPA) formation due to provisioning for its Greater China real estate exposure, as well as the downward revision to its fee income guidance from high single digits to a low single digit 

UOB had also missed its own guidance for a net interest margin (NIM) of 1.75%, with actual July NIM realising 1.71%

This time, the market will similarly be looking at its NPA formation and whether there would be further provisioning on its Greater China exposure

A clean quarter on asset quality would likely to be a positive share price catalyst

How can investors trade the short-term moves in UOB ahead of or on the back of its result? 

✳Those who believe that UOB's share price can hold above its 200-day MA of $39.57 and rebound on better-than-expected earnings tomorrow can consider a leveraged exposure using trending UOB call warrant $UOB MB eCW270225(9R7W.SI)$  which has fallen 21.6% to SGD 0.058 given UOB's -2.4% fall over the past two days

✴Those who are concerned that earnings could disappoint can consider trending UOB put warrant $UOB MB ePW270226(YV0W.SI)$ which is currently trading 16.3% higher to SGD 0.107 this week

❗With UOB the first amongst the banks to report, the currently depressed sentiment and discounted valuation will make it one of the most closely watched Singapore stock today