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Singapore bank stocks sell-off. Weekly recap and what to watch in the week ahead

20 May 2023

SIA posts record profit but Sea and Grab disappoint

This week, the Japanese and German stock markets climbed to record highs. 

However, the Singapore stock market is being left out of the global optimism, with the Straits Times Index (STI) falling 0.2%.

One of the reasons for the weakness is the continued sell-off in Singapore bank stocks, even as DBS, UOB and OCBC have reported stellar results recently. 

We take a deep dive into what is causing the fall in Singapore bank stocks, and try to understand what investors should look out for next. 

If you have any questions about how to invest with growing recession concerns, join us for our upcoming free webinar on 25th May. 

Weekly market recap 20 May 2023
Source: Bloomberg. Price as of market close on 19 May

🏦 Singapore bank stocks under pressure

What happened? 

The share prices of DBS, UOB and OCBC have been falling even after they posted record high profits recently. 

Growing investor concerns about a peak in net interest margin and a slowing economy might have led to a selloff in the bank stocks.

What does this mean?

Across the three banks, UOB and OCBC already saw a decline in their net interest margins in the first quarter compared to the previous quarter.

While DBS posted an increase in net interest margin, the company has lowered its net interest margin expectation for the rest of the year. 

Why should I care? 

With less room for earnings to surpass expectations, investors could start to focus more on the dividend payout. Singapore banks are expected offer a dividend yield of between 5.4% and 6.5%, based on data as of 16 May 2023. 

Read our full analysis on what to expect next for Singapore banks

🚗 WHAT'S MOVING

  • Sea Limited (SE) reported weaker than expected first quarter results. The number of paying users for its Gaming business of 37.6 million was lower than the 41 million expected. The company’s profit was also impacted by an impairment of goodwill of US$118 million relating to a prior acquisition. 
  • Grab (GRAB) reported a loss of US$250 million in the first quarter of 2023, narrowing from US$435 million the previous year. However, gross merchandise value (GMV) growth slowed to just 3% with softer Deliveries demand.
  • Alibaba (BABA) reported weaker than expected revenue in the first quarter, reinforcing concerns about a slow recovery in Chinese consumer spending. The company also announced that it intends to spin off its cloud division by distributing stock to shareholders. 
  • Singapore Airlines reported a net profit of S$2.2 billion for the fiscal year ending 31 March, the highest full year net profit in its 76-year history. The company announced a final dividend of S$0.28 per share, bringing the total dividend for the fiscal year to S$0.38 per share. Read our analysis here
  • CapitaLand Ascendas REIT will be acquiring Seagate Singapore’s integrated research and development facility, The Shugart, for S$218 million. The transaction is expected to be accretive to unit holders, and will be funded by an equity fund raising to raise gross proceeds of S$450 million. 

Source: Bloomberg, CNBC, Financial Times, Business Times, Edge Singapore

 

💡 THE BIG IMPORTANT STORY

Will the T-bill yield rise with a spike in US bond yields?

The 6-month Singapore government bond yield remains steady at about 3.75% even though US bond yields have spiked.

Singapore 6-month T-bill auction 25 May 2023

🤓 WHAT WE’RE LOOKING OUT FOR THIS WEEK

Source: Bloomberg, SGX 

[LAST FEW DAYS] Earn a S$20 Grab voucher and up to US$500 welcome rewards when you open a Webull stock trading account through Beansprout. T&Cs apply. Learn more about the promo.

🍭 THAT’S INTERESTING

Singapore Airlines (SIA) will be rewarding eligible employees with a bonus of about 8 months following its record full-year profit. This includes a profit-sharing bonus of 6.65 months, and a maximum ex-gratia bonus of up to 1.5 months in recognition of their hard work and sacrifices during the pandemic. Likewise, SIA’s budget airline Scoot will give a bonus of about 6 months to eligible employees. However, senior management will not receive the additional ex-gratia bonus.

Source: Channelnewsasia

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