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BANKS have put out their promotional fixed-deposit (FD) rates in the lead-up to Chinese New Year that reflect higher funding costs and greater competition.
The offer meets demand from investors in this volatile market environment who would rather batten down the hatches than go bargain hunting. And they would not be alone. Investors upped the proportion of their portfolios held in cash to 5.4 per cent - the third highest percentage since 2009 - the global fund manager survey from Bank of America Merrill Lynch showed this month.
The surest sign of rising deposit rates comes from those revised by Singapore's largest retail bank DBS - which does not need, and says it does not compete for, fixed deposits.
Even so, the least aggressive of the lot has raised its six-month rates to 0.2 per cent per annum for any amount from S$1,000 to a dollar shy of a million dollars. This rate was up from 0.15 per cent per annum.
Most of the other banks - and, in particular, the foreign lenders - tier their January offers based on timeframe, and sums. Direct comparisons are difficult. Some banks stretch out the tenor a month longer than the usual 6-12 months, and minimum sums are not consistent. Priority customers at certain banks get preferential rates, too.
For a customer with S$25,000 to set aside for about half a year, CIMB, Maybank and Standard Chartered stand out. CIMB and Maybank offer 1.6 per cent per annum for a six-month FD, while Standard Chartered pays an interest of 1.65 per cent per annum if a customer parks his cash with it for seven months.
"Demand for Sing-dollar time deposits remain healthy as the first quarter is typically when customers receive their bonuses," said Choong Wai Hong, head of community financial services, Maybank Singapore. "The Chinese New Year festive period also sees banks offering seasonal gifts to reward customers when they deposit larger amounts in Sing-dollar time deposits."
UOB and OCBC also said they see a healthy and stable FD portfolio.
The toss-up goes beyond deciding among equities, bonds, cash, or the best promotional gift from the bank.
In the rising-interest-rate environment, investors may see a further lift in deposit rates, and may opt to take shorter tenors of 6-12 months, and have that cash rotated into another FD with better rates later. The trade-off is to accept a lower rate for the short-tenor FD.
"FD rates in Singapore will rise in the next few years, due to a generally increasing interest-rate environment as well as other factors, in particular current investor concerns and uncertainties around the direction of global equities and impacts flowing from a slowing China. This will be a gradual rise but it also won't reach levels seen during the turn of the millennium," said Jonathan Chng, senior market analyst at East & Partners Asia.
If the same customer wants to stay invested in S$25,000 for longer, Maybank is also dangling attractive rates. Its 12-month FD will offer 1.9 per cent per annum, while its 24-month FD will pay 2 per cent per annum.
The bank has seen just about two- thirds of customers looking at longer- term deposits. "Maybank has always offered attractive rates to customers, and we do not expect this to change," said Maybank's Mr Choong.
Standard Chartered has seen good response to its fixed-deposit offers, with a slight shift towards a mid-term tenor, its spokeswoman said. The bank offers 1.85 per cent per annum for S$25,000 held over 12 months.
Hong Leong Finance, which was the first to launch a promotional rate at the end of 2015, also said its 13-month and 18-month deposit products have been well received. Customers with S$200,000 lying around can keep that with Hong Leong for 18 months to reap an interest of 1.99 per cent per annum.
Other banks see customers flocking to shorter-term tenors. "The general market sentiment is that rates will further increase. This has impacted depositors' decisions when taking up fixed deposits, which are currently geared towards shorter-term commitment," said Charles Wong, head of retail banking, Citibank Singapore.
The fixed-deposit market will continue to be competitive, given this volatile market environment, said Philip Lim, head of retail banking in Singapore, ANZ. In hopes that customers are looking beyond rates, ANZ offers a fixed-deposit product that pays the entire interest on the same day that the funds are placed in the account.
Similarly, Matthew Colebrook, head of retail banking and wealth management, HSBC Singapore, said rising interest rates would make it more attractive to save in a deposit account because of the interest yields.
"Having said that, considering the gradual pace of increase in interest rates and impact of inflation, the real value of cash and deposits is expected to remain slack for a certain period of time," he said. "We advise clients to have a diversified portfolio compared to concentration in cash or fixed deposits."
The story has been updated to include CIMB's rates.