Singtel share price sinks or swims with digital banks?

SIGN UP FOR $10 TO UNLOCK ALL ARTICLES! The headlines screamed “Singtel share price soared with digital bank win”. Yet on 7 December (the following Monday after which Grab-Singtel consortium won a full digital banking license from MAS), short-selling volume rose to a stunning high of 21 million shares. This is almost five times the average short-selling volume for this counter. What’s going on?

As one of the leading lights of SGX mainboard, Singtel share is highly popular with investors. So the recent digital bank license win must have brought some relief to many of these long-suffering investors. For the past one year, Singtel share price had been in terrible form, plunging from $3.40 at the start of the year to a low of $2.00 on 2 November. Not surprising, the key culprits for the bearish form of Singtel share price were the COVID-19 pandemic and the losses from Airtel.

Singtel share price

Then on 12 November, Singtel share price came under further pressure following the announcement of the 1HFY2021 results which saw the interim dividend falling to 5.1 cents. This is the lowest interim dividend in the past decade.

The digital bank license win should renew faith and increased interests among retail investors in Singtel share price. Thus, I suspect that the short sellers must be banking on this to ambush unwitty retail investors. In recent years, the changes made to SGX Securities Borrowing and Lending (SBL) programme lend support to short selling activities.

With effect from 2 December 2019, SGX replaced the fixed rates for SBL programme. The borrowing rates for index stocks had been dramatically reduced from 6% per annum to a low of 0.5% per annum! To rub salt into injury, the borrowing rate is only 0.25% per annum for Singtel shares! At such dirt- cheap rate, the big boys can easily afford to short Singtel share price as and when they like. In my opinion, this is an ominous change for Singtel share price because this counter is a favourite among short-sellers.

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Although many investors celebrate Singtel’s digital bank win, I have a contrarian opinion and view the digital bank adventure more of a red herring for Singtel share price. Make no mistake, I love this stock and actually was about to invest in this counter back in 2019. However, through my research, I have decided to give it a miss because of several factors. In this article, I will share my outlook on Singtel share price in the coming months.

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. Furthermore, I am not vested and have never invested in Singtel before. Whether Singtel share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.

Singtel share price in turbulence

Long-term investors may not like what I am going to share about Singtel share price. In any case, I am just sharing my honest opinions and will leave it to investors to draw their conclusions. The thing about Singtel is that it is definitely not a bad stock. However, a confluence of factors combined to dim the outlook for Singtel share price in the coming years.

In my view, the digital bank win could bring more harm than good to Singtel share price. Why is this so? Firstly, [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.]

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Updated: December 10, 2020 — 7:42 pm

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