• August 3M-SIBOR was up by 25bps MoM to 2.72%, the highest in over a decade. Loans growth in Singapore rose 6% YoY in July.
• Singapore domestic loans grew 6.3% YoY in July, tracking our estimates, while Hong Kong’s domestic loans declined 0.08% YoY and 0.42% MoM in July.
• Maintain OVERWEIGHT. We remain positive on banks. Bank dividend yields are attractive at 5% with upside surprise due to excess capital ratios. Stable economic conditions and rising interest rates remain tailwinds for the banking sector. SGX is another beneficiary of higher interest rates. Pressure points for the banks will be higher staff costs and a nudge in general provisioning due to weaker economic assumptions.

3M-SOR and 3M-SIBOR continue to climb in August

Interest rates continued to increase in August. The 3M-SOR was up 25bps MoM to 2.72%, while the 3M-SIBOR was up 51bps MoM to 2.53%. It is the highest interest rates have been in over a decade. The 3M-SOR is 128bps higher than its 2Q22 average of 1.44% and has improved by 254bps YoY. The 3M-SIBOR is 131bps higher than its 2Q22 average of 1.22% and has improved by 210bps YoY (Figure 1).

Singapore loans growth tracking forecast

Overall loans to Singapore residents – which captures lending in all currencies to residents in Singapore – rose by 6.3% YoY in July to S$838bn, tracking our estimate of mid-single digit growth for 2022 as economies in ASEAN begin to recover from the pandemic lockdowns and borders start to reopen.

Business loans grew by 7.3% YoY in July, even though business loans dipped by 0.6% for the month. Loans to the building and construction segment, the single largest business segment grew 6.3% YoY to S$173.8bn, while loans to the manufacturing segment grew 10.3% YoY in July to S$27.6bn.

Consumer loans were up 4.6% YoY in July to S$315.3bn, aided by strong loan demand in the housing segment. Housing loans, which make up ~70% of consumer lending, grew 5.7% YoY in July to S$220.5bn for the month.

Total deposits and balances – which capture deposits in all currencies to non-bank customers – grew by 10.8% YoY in July to S$1,695bn. Current Account and Savings Account (“CASA”) proportion remained stable at 22.6% of total deposits or S$383.5bn.

Hong Kong loans growth stablises in July

Hong Kong’s domestic loans growth declined 0.08% YoY and 0.42% MoM in July. The YoY decline in loans growth for July was an improvement from the decline of 2.34% in June, while the MoM loans growth decline of 0.42% was 25bps higher than June’s loans growth decline of 0.17%.

Volatility fell as market sentiment remains subdued

Preliminary SDAV for August dipped 12% YoY to $1,083mn (Figure 4), as market sentiment remained subdued due to macroeconomic factors. The VIX averaged 22.2 in August, down from 25.0 in the previous month.

The top five equity index futures turnover saw a dip of 4.2% YoY in August to 13.71mn contracts (Figure 5), mainly due to the lower trading volumes of its FTSE China A50 Index Futures and FTSE Taiwan Index Futures. Notably, the MSCI Singapore Index Futures grew 6.9% MoM to 1.21mn and the FTSE Taiwan Index Futures dipped 15.3% MoM to 1.21mn.