Reasons to invest in Singapore banks
They have robust earnings potential, and are expected to maintain dividend yields of between 5% and 6% over the next two years
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SINGAPORE’s top three banks have achieved substantial earnings growth over the past two years, supported by an elevated interest rate environment. This has led to impressive year-to-date share price growth, ranging from 13 to 29.4 per cent as at Oct 30.
Although the Federal Reserve began cutting interest rates in September, Singapore banks had anticipated this move and mitigated the potential effects to their earnings. Thus, they have demonstrated a strong capacity to sustain earnings, even in a gradually cooling interest rate environment.
Singapore’s rate landscape
Singapore’s inflation is rather persistent. In September, core inflation accelerated for the second consecutive month, reaching 2.8 per cent year on year (yoy). The economy also grew strongly, with advanced estimates showing Q3 GDP growing by 4.1 per cent yoy. While imported inflation is moderating, stronger-than-expected wage growth and ongoing geopolitical tensions continue to hinder the progress of disinflation.
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