Singapore banks: the largest rate hike beneficiaries in the ASEAN


Global markets have become volatile amid inflationary pressures and tighter monetary conditions. Inflation has also started to hurt Asia markets, with central banks starting to take the direction of the US Fed. However, despite market volatility, we are finding investment opportunities in certain parts of Southeast Asia, particularly those that benefit from the current macroeconomic backdrop.

One of them is Singapore’s banking sector, which we view as the largest rate hike beneficiaries in Southeast Asia. As Singapore tends to track the Fed fund rate direction, the banks’ interest rate margins (NIM) may be bolstered. While other ASEAN countries would see the same direction in rates as the US, the magnitude of hikes would trail Singapore. The Lion City is expected to have five-six rate hikes this year, which compares with just three in other ASEAN markets, such as Indonesia and the Philippines.

Singapore’s banking sector is also supported by loan growth on the back of the reopening of the economy. Singapore’s three largest banks saw their loans grow 8-9% YoY, according to their earnings results1. As some banks have huge business exposure to the ASEAN, the healthy growth in loans is expected to continue on the back of the region’s reopening and expected boost in infrastructure spending. Some banks also have higher exposure in China, which should benefit them from China’s economic recovery.

In terms of valuations, Singapore banks remain attractive, with an average price-to-book (P/B) ratio of 1.2x, which continues to lag behind pre-Covid levels. They also have good dividend yields of about 4.5-4.9%2. Against the favorable macroeconomic backdrop of Singapore, the banks’ operating outlook should be positive, and we expect valuations of Singapore banks to rerate in the second half of the year.

Overall, Singapore continues to enjoy favorable macroeconomic fundamentals on the back of its reopening and economic recovery. During the first quarter, the economy grew by 3.7% YoY in the first quarter, which was in line with market expectations, according to data from the Singapore Department of Statistics3. Meanwhile, manufacturing production continued to advance by 6.2% YoY in April, beating market estimates of a 5.1% rise4. Furthermore, as the country fully reopened its borders to all vaccinated visitors in April, together with the continued expansion of the manufacturing sector, the government expects the real GDP to grow by 3-5% in 20225.



  1. S&P Global, 12 May 2022
  2. Bloomberg Terminal, 24 June 2022
  3. Singapore Department of Statistics, 25 May 2022
  4. Singapore Department of Statistics, 26 May 2022
  5. Singapore Ministry of Trade and Industry, 26 May 2022


The views expressed are the views of Value Partners Hong Kong Limited only and are subject to change based on market and other conditions. The information provided does not constitute investment advice and it should not be relied on as such. This material contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. All material has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. This commentary has not been reviewed by the Securities and Futures Commission. Issuer: Value Partners Hong Kong Limited.

Investors should note that investment involves risk. The price of units may go down as well as up and past performance is not indicative of future results. Investors should read the explanatory memorandum for details and risk factors in particular those associated with investment in emerging markets. Investors should seek advice from a financial adviser before making any investment. In the event that you choose not to do so, you should consider whether the investment selected is suitable for you.