STI gains 2% in early trade, lifted by gains on Singapore banks

THE Straits Times Index (STI) gained just over 2 per cent in early-morning trade on Thursday, lifted by strong gains on Singapore banks.

Shares of DBS gained 36 Singapore cents, or 2.5 per cent, to S$14.60. UOB gained 32 Singapore cents, or 1.8 per cent, to S$17.97, while OCBC rose to S$8.53, up 22 Singapore cents or 2.65 per cent.

Fitch Ratings in a report this week said Singapore banks' credit profiles are likely to remain resilient, despite macroeconomic headwinds in 2016.

If low oil prices are prolonged, Fitch expects the impact on banks' earnings from credit stress for Singapore banks to be manageable.

"Such exposure is moderate as a proportion of banks' overall portfolios, and is often secured with moderate loan-to-value ratios, which limit the loss even with falling collateral values," it said in a report on Tuesday.

Fitch expects the domestic property market to correct further as a large supply of new homes comes on to the market while the economic outlook sours.

But mortgage asset quality should stay resilient in the absence of any significant increase in the unemployment rate, it said.

"Household balance sheets remain broadly healthy, and macro-prudential measures in recent years have focused on ensuring that households borrow within their means," Fitch said.

Singapore banks' capital positions should also remain strong in the medium term, supported by adequate internal capital generation and slower asset growth, it added.

As at 10.15am, the STI gained 47.35 points, up 1.74 per cent, to 2,774.31.