Singapore banks are in a good position despite concerns about U.S.-China trade tensions and Singapore's dependence on global trade. Citi's Head of Asia Investment Strategy explains why to finews.asia.
Singapore banks are in relatively good positions despite general concerns about how the trade war will affect Singapore's economy, says Ken Peng, Citi's Head of Asia Investment Strategy. This has to do with Singapore's position as a wealth-management hub and signs that U.S.-China trade talks could see some progress.
«Singapore banks have strong wealth management divisions that benefit from structural growth in private wealth in Asia. The trade issue is not that bad for Singapore,» said Peng, who spoke at the bank's 2019 Global Outlook briefing on Tuesday.
«Companies are relocating their supply chains out of China, but these products may still have to go through Singapore,» he added.
Banking On Development
Asian development - selected by Citi's investment strategy team as one of three unstoppable trends for long-term investing - ties in with growing wealth in the region. Asia Ex-Japan, despite contributing a higher share of global output over the past two decades, still represents only 11 percent of global equity benchmark and under 6 percent of global fixed income benchmark.
Also, savings rate in Emerging Asia has been above 35 percent over the last decade, as compared to savings rate of around 23 percent for advanced economies, according to data from the IMF. «High savings rate drive development,» said David Bailin, Citi's global head of investments, who was also speaking at the event.
Value In China's Bank-Issued Bonds
Besides liking Singapore banks in the Asian region, Ken sees good value in China's banks and technology firms. Last year, smaller banks were under pressure of corporate defaults and rising non-performing loans (NPL) due to tighter regulation to recognise NPLs. As a result, some regional banks' perpetuals saw double-digit declines.
«Now, Chinese monetary policy has turned to more significant and broad easing. This is likely to reduce default risk fears and help stabilise banks. We believe bank-issued bonds, including perpetuals, could benefit from policy easing,» added Peng.
Within Chinese equities space, the most discounted sector is technology. «At 18 times trailing price-earnings, the sector is two standard deviations below its mean,» Peng noted. The progress in U.S.-China talks could bode well for export-dependent tech firms, plus a more «normalized» monitoring environment on the tech sector means that the «cloud over technology stocks is being lifted».
