- Downgrade Singapore banks to MARKET WEIGHT. The influx of safe haven liquidity could be structural and persistent, thus continuing to exert downward pressure on banks’ NIM. BUY OCBC. HOLD DBS.
- - Read this at SGinvestors.io -
Singapore has become a magnet for liquidity seeking shelter.
- Singapore’s reputation as a safe haven has attracted defensive capital flows, especially considering geopolitical uncertainties globally and major policy shifts in the US. Singapore’s disciplined and prudent fiscal policy stands in stark contrast to the US’ profligate, unsustainable and persistent fiscal deficits. Our stature as a financial and advanced manufacturing hub is further enhanced by having a low reciprocal tariff of 10%.
Negative impacts of influx liquidity.
- - Read this at SGinvestors.io -
Low interest rates exerting downward pressure on NIM.
- Domestic interest rates are depressed by the huge influx of liquidity seeking to avoid instability elsewhere. Recently, overnight SORA dropped to a low of 0.73% during social unrest and the series of demonstrations in Indonesia in late- August. Three-month compounded SORA fell by a massive 147bp to 1.60% in 8M25.
- The stubbornly low domestic interest rates, which look to be structural in nature, are expected to exert downward pressure, thus keeping the NIMs for Singapore banks depressed.
Overseas growth moderated by strong S$.
- Read more at SGinvestors.io.
