Singapore’s banks remain resilient despite volatility


US CPI slightly decelerated to 8.3% in August from 8.5% in the previous month1, but the figure is still more than expected as investors await signs that the Fed’s rate hikes may finally curb inflation. Interest rate futures now indicate that investors are betting the Fed funds rate to peak at around 4.6% in 20232.

The US dollar has been rising largely due to the aggressive tightened monetary policies. As a result, Asian currencies have been hit since the beginning of the year. However, the Singapore dollar has only dropped over 4%2, making it more resilient than most Asian currencies. In addition, any further depreciation in the currency will likely be limited as Singapore is expected to tighten monetary policies further due to rising inflation.

Singapore equities have also held up despite the volatility in the global stock market, benefitting from the ongoing improvement of its overall economic conditions. As of 20 September 2022, the Straits Times Index climbed 4.6% this year2.

Banks in the city-state were among those that performed strongly, with the stock prices of the three largest banks returning 6-14% this year2. In addition to benefitting from monetary tightening, local banks have also benefitted from more loans coming from businesses globally as they set up or put in more resources locally to take advantage of the city’s reopening. Deposits have also grown, with the total deposit amount across the three banks growing between 5.6% and 10% YoY3, partly driven by residents outside Singapore, who have chosen to put money in Singapore given its wealth center status.

With Singapore’s many business-friendly policies for foreign companies and its regional financial and wealth center status, we view that Singapore will continue to drive the demand for loans and other banking services, which should be favorable for the banking sector. Against this business environment, we believe that the profitability of the three banks should improve further, giving more room to pay shareholders higher dividends. The average dividend yield of these banks is about 4%2, which is attractive to investors. Given the current volatile market conditions, we believe they can build defensiveness in a portfolio.


  1. US labor department,  13 Sep 2022
  2. Bloomberg, 19 Sep 2022
  3. SGX, 19 Sep 2022
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