Local Banking Sector & Commentary 29/3/2023

The 3 local banks recently announced 2022 Q4 earnings and rewarded shareholders with increased dividends payout.

However my view is that investors should be more concern over the future coming prospects of the local banking sector rather than the dividend yield.

From the above table,

The bank that pays out the highest yield is OCBC. Though UOB dividend yield is the lowest among the 3 local banks, they may register the highest EPS growth over 2023-2024 with the acquisition of CitiBank Thailand, Malaysia, Vietnam and Indonesia Units. DBS Group acquired CitiBank Taiwan.

Note: Dividend Yield computation is based on quarterly, interim, final dividend payout and does not take into account of special dividend. Dividend Payout and Dividend Payout Ratio is subject to management discretion.

Lets take a look at recent top management commentary to gain an insight about the future prospects.

DBS Chairman comments " Our business pipelines are healthy and asset quality robust. We expect confidence to return to markets in the coming year as interest rate increases ease and China reopens. The substantial increase in our ordinary dividend and the special dividend to a total of 92 cents per share reflect our robust earnings profile and the strength of our capital position. This brings the total payout for the financial full year to SGD 2.00 per share.”

UOB CEO comments " The ASEAN region is vibrant with immense long-term potential. We remain positive on the region despite the global economic gloom in the near term. Looking ahead, we are confident that our strategy of seeking growth while ensuring stability will continue to create value for our customers and other stakeholders."

OCBC CEO comments "Looking ahead, our key markets in Asia are expected to remain resilient, and growth is forecasted to outpace the global average in 2023. We are optimistic that the reopening of China and Hong Kong SAR could further spur regional economic growth. We enter the new year with confidence as we drive for sustainable growth and deliver long-term value to our shareholders.”

My Opinion

The the collapse of Silicon Valley Bank in US and negative market sentiment, has resulted in the drop in energy prices. Inflation is likely to ease off. The era of aggressive rate hike by US Fed is more or less over. Taking into account of a softer economy, its time to look at companies with sustainable earnings with manageable debt levels.  If there are no further headwinds apart from the stress face by Credit Sussie, I am in the opinion that the Banking Sector is able to maintain the current level of dividend payouts.

For those who are holding on to SG Banking stocks, keep your fingers crossed that there will be no recession in US. A recession is US will lead to interest rates cut which can be deemed negative to SG Banks' earnings.

DBS Group Holdings Bonds Prices

Fund Transfer from DBS Bank Multi-Currency Account (Non-SGD) - NEW

 For clients using DBS Multi-Currency Accounts, Good news for you! 

 

We are pleased to inform you that we have introduced a new payment mode for multi-currency (Non-SGD) account transfer for DBS customer with multi-currency bank account.

 

DBS customer with multi-currency bank account can initiate a Non-SGD (USD, HKD, AUD and GBP) account transfer directly to Phillip Securities Pte Ltd DBS multi-currency account at zero bank charges as follow.

 

Say goodbye to the hefty Telegraphic Transfer bank charges.

 

For more details please refer to:  https://www.poems.com.sg/payment/

Poems Notification on Phillip Funds Exposure to SVB and Credit Sussie

Dear all,

I've received the following notification from Phillip Capital for your information below:

Phillip Funds do not have any exposure to SVB and Credit Suisse. The current bank failures have no material impact on our funds. In fact, Phillip SGD Money Market Fund, Phillip USD Money Market Fund and Phillip SGD Money Market ETF are well diversified across industries, keeping high overnight liquidity and holding high exposure to the MAS Government Bills. We will conduct stress tests and quantify the impact concurrently to back our reassurance.

Poems - Treasury Products

 

Treasury Products

(Details as of 24th February 2023)

 

Want to get exposure on Treasury Products but not sure how? Fret not as investors are now able to trade Singapore Government Securities and US Treasuries with us with a minimum lot size of SGD250k for Singapore Government Securities (SGS) Bonds and USD200K for US Treasuries bills. For Singapore Treasury bills (T-bills), investors will be able to apply with minimum lot size of SGD100K with us through the primary market, while SGS bonds and US Treasuries will only be available on the secondary market basis.

Do note that Phillip Bond Desk will be charging a 0.1% on the issue price for Singapore T-bills as well as a SGD15 charge if allocation size is less than SGD100k. More details can be found on the Pricing table below.

 

What are Treasury Products?

Singapore

Singapore Government Securities (SGS) are debt obligations issued by the Government of Singapore to finance its spending and raise funds. They are backed by the full faith and credit of the Singapore Government which offer investors a safe and liquid investment option with predictable returns. Singapore Government Securities are issued in several maturities, ranging from short-term bills (T-bills) to long-term bonds (SGS bonds) and they are widely used as benchmark investments by individuals, institutions, and governments. The Government of Singapore issues SGS bonds and T-bills on a regular basis through public auctions.

United States

Similar to Singapore Government Securities, US Treasury securities are debt obligations issued by the US government to raise funds to finance its operations. Treasuries are considered to be among the safest investments in the world, as they are backed by the full faith and credit of the US government. There are several types of Treasury securities, including Treasury bills (T-bills), Treasury notes (T-notes), and Treasury bonds (T-bonds). T-bills are short-term securities with maturities of one year or less, T-notes have maturities ranging from two to ten years, and T-bonds have maturities of more than ten years. Treasuries are widely used as benchmark investments by individuals, institutions, and governments around the world.

Pricing

	SGS T-Bills	SGS Bonds	U.S Treasury
Trading	Primary	Secondary	Secondary
Min Size	SGD 100,000	SGD 250,000	USD 200,000
Custody Fee	N/A	0.05% p.a	0.05% p.a
Fees	0.10% (Additional SGD15.00 T-bills small size fee if allocated size is less than 100k)	Please refer to POEMS for indicative bid/offer	Please refer to POEMS for indicative bid/offer

Note:

1. Singapore Government Securities (SGS) purchased via wholesale institutional tranche are cleared through MAS MEPS+ system and cannot be sold on SGX retail platform.
2. Not Applicable for CPF OA/SA and SRS

 

Why Treasury Bills/Notes/Bonds?

Treasury Bills are debt obligation issued by the government to fund various public projects. These bills commonly have a short maturity from either 6 months to a year period or for those that has a longer tenor which are normally called notes/bonds. The maturity will tend to span from 2 – 50 years. These securities are widely regarded as low-risk and secure investments which is a good option for risk adverse investors who wish to park their idle funds to grow some interest.

 

How to trade SGS Bonds and US Treasuries with us? (Secondary Market)

Click here to see https://www.poems.com.sg/bonds/treasuries/

Please contact me at +65 90400848 or email to me at lionellimtp@phillip.com.sg if you have queries.

Please contact me for account opening as well.

https://www.poems.com.sg/open-an-account/?TR=BA6

HSBC Bond Yield to Call/Yield to Maturity Above 5%

 

Minimum Amount USD 200,000

If you have any queries, please contact me at +65 90400848 or email to me at lionellimtp@phillip.com.sg

US$ Bond Yield to Maturity 6% and Above

The below prices are extracted from Poems Bond Screener this morning. If you are interested, please contact me at +65 90400848 or email to me at lionellimtp@phillip.com.sg.

Minimum Investment Amount US$200,000

A$ Bonds Yield to Maturity above 4%

 

The above prices are extracted from Poems Bond Screener this morning. If you are interested, please contact me at +65 90400848 or email to me at lionellimtp@phillip.com.sg.

Minimum Investment Amount A$200,000. AI declaration required.

What's my Asset Allocation Strategy?

As at 1st of February 2023, US Federal Reserve raises interest rate to 4.75%. Due to the strong US labor market, US is unlikely to fall into a Recession in 2023 hence there is a low possibility that there will be a rate cut in 2023. With the reopening of China's borders, global economic growth is expected to pickup this year. Recessionary fears will be receded. After taking into the account of 2022 and 2023 monthly energy prices so far, year on year inflation is expected to ease from middle of 2023 onwards. The effect of China's growth will provide support for energy prices.

Nevertheless, interest rates are likely to stay higher for a longer period of time and US Federal Reserve is expected to continue raising interest rates in 2023.

Taking into account of the above, bearing any unforeseen circumstances, this is how I will allocate my funds if I am flushed with cash in my Cash Management Trust Account.

20-30% Equity and Commodities

30-40% Corporate Bonds, Reits and Trusts

30-40% Phillip Money Market Fund, Government and Statutory Board Bonds(mid-long tenor) and Gold ETF/Mines

Asset Allocation is based on individual's risk appetite and profile. It will keep changing and evolving as our circumstances, needs and opportunities changes along the way.

Excess Cash can be parked in Phillip Money Market Funds to earn a better return compared to savings account. 

Funds in the Phillip Money Market account can be used automatically to take advantage of the volatility in the market without the hassle of transferring money to/from savings account. 

Same day withdrawal if online withdrawal form is submitted before 10am.

For more information please click HERE.

For more news on Cash as a Winning Strategy, click HERE.

Do contact me directly if you want to open an account with me.

Or should you have further queries, do contact me at lionellimtp@phillip.com.sg / +65 90400848.

https://lionelltp.blogspot.com/p/disclaimer.html

https://www.phillip.com.sg/sg/talktophillip/Lionellim/

STI Chart 4/3/2023

 

STI Chart Live as at 4/3/2023 extracted from Poems 2.0 website.

STI close at 3232 on 3/3/2023 at immediate support level. Next Support level is at 3174 area.

Points to take note:

Next Fed Meeting is on 21-22 March 2023. Will it be a 25 or 50 basis points hike? Will STI immediate support be broken if its a 50 basis point hike?