Singapore Banks Facing Headwinds Amid Global Trade Tensions

Lim & Tan Securities | April 7, 2025
According to Lim & Tan Securities’ latest research report, Singapore banks are facing significant challenges amid the ongoing global trade tensions and economic uncertainty.

Downgrade to “Neutral/Hold” for Singapore Banks

Lim & Tan Securities has downgraded its ratings on Singapore’s three major banks – DBS, OCBC, and UOB – to “Neutral/Hold.” This comes as the analysts expect these banks to remain under pressure, in line with the broader sell-off in global banking stocks.
The report cites several key factors weighing on the Singapore banks:
Concerns over global stagflation and recession, which could lead to rising loan losses and squeezed net interest margins.
Escalating trade wars between the U.S. and China, which could disrupt global trade and capital flows, impacting banks with significant international exposure.
Volatile equity markets, which could hamper investment banking and wealth management activities.
Despite the near-term challenges, the analysts highlight that Singapore banks’ attractive dividend yields (around 5-6%) and low valuations (P/E of 9x-10x) may help offset the heightened market volatility.

Impact on Global Banks

The report notes that the sell-off in bank stocks is not limited to Singapore, but is a global phenomenon. Major international banks, such as HSBC and Standard Chartered, which have significant exposure to Asia, have also been hit hard, with their share prices declining by 15% and 20%, respectively, since Wednesday.
Investment banks and wealth managers are also not spared, as the report indicates that the decline in deal-making and capital markets activity, coupled with the broader market downturn, is further darkening the outlook for these institutions.

Defensive Play Amid Uncertainty

Given the volatile market conditions and the potential for further escalation in global trade tensions, the analysts recommend Sheng Siong Group as a defensive stock to hold. Sheng Siong, one of Singapore’s largest retailers, has demonstrated resilience in the face of these challenges, delivering a 4.5% year-on-year revenue growth and a 2.6% increase in net profit in fiscal year 2024.
The report highlights Sheng Siong’s ongoing expansion, with six new store openings in 2024 and two more in early 2025, as well as its focus on developing its house brands to offer customers quality alternatives at affordable prices. With a market capitalization of S$2.5 billion and trading at a forward P/E of 16.7x, the analysts believe Sheng Siong is well-positioned to weather the current economic storm.

Conclusion

In summary, Lim & Tan Securities’ research report paints a challenging outlook for Singapore’s banking sector, as it grapples with the ripple effects of global trade tensions and economic uncertainty. The analysts’ downgrade of the major banks to “Neutral/Hold” reflects their cautious stance, while their recommendation of Sheng Siong as a defensive play underscores the need for investors to seek out resilient, value-oriented companies in the current market environment.