Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Asia’s leading multi-asset exchange

SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Equity Bottom-Up

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This year the trio of DBS, UOB and OCBC have contributed more than 25% of the average daily turnover of the Singapore stock market, while averaging a 3% YTD total return following the 25% average total return in 2021. Institutions have also been net sellers of the trio in the 2022 YTD, following on from net buying in 2021. 
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<li>The trio are scheduled to report 1H22 results from tomorrow, with UOB reporting Fri 29 July , OCBC on Wed 3 Aug, and DBS on Thu 4 Aug – all prior to market open.</li>
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The trio’s combined NII has generated consecutive QoQ gains for the past six quarters from 4Q20 through to 1Q22. Key details with the reports that the market will be looking for include the magnitude of NIM expansion, non-interest income and also credit costs. During 1H22, Singapore’s compounded 1M SORA gained close to 80 bps. 
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DBS, UOB, OCBC Avg. 3% YTD Total Returns, Outperforming 3% Decline for Global Peers

In the 2022 year-to-date, DBS Group Holdings ("DBS"), United Overseas Bank ("UOB") and Oversea-Chinese Banking Corp ("OCBC") have ranked as the most traded Singapore stocks, contributing 27% of the day-to-day turnover of all stocks listed for trading in Singapore.

During the year, the trio averaged a 3% total return, in contrast to the top quartile of global bank stocks by market value which have declined 3% in SGD terms. Following S$1.7 billion of combined net institutional inflows in 2021, the trio all continued to attract net institutional inflows in the first two months of 2022, before global growth concerns weighed the global sector, which has seen the trio draw just over S$950 million of net institutional outflows in the 2022 year through to 27 July. Retail investors, on the other hand, net bought slightly over S$1.32 billion of the trio in the 2022 YTD. The individual performances are tabled below. 

<table class="table table-striped"><tbody>
<tr>
<td>
			Stock
			</td>
			<td>
			Code
			</td>
			<td>
			2022 YTD AVG Daily Trading T/O
			</td>
			<td>
			Mkt Cap (S$B)
			</td>
			<td>
			2022 YTD Net Insti Flow (S$M)
			</td>
			<td>
			YTD Total Return %
			</td>
			<td>
			2021 Net Insti Flow (S$M)
			</td>
			<td>
			2021 Total Return %
			</td>
			<td>
			P/B (x)
			</td>
			<td>
			Ind Div. Yield %
			</td>
		</tr>
<tr>
<td>
			DBS
			</td>
			<td>
			D05
			</td>
			<td>
			156
			</td>
			<td>
			81
			</td>
			<td>
			-687
			</td>
			<td>
			-1
			</td>
			<td>
			1,172
			</td>
			<td>
			35
			</td>
			<td>
			1.4
			</td>
			<td>
			4.4
			</td>
		</tr>
<tr>
<td>
			UOB
			</td>
			<td>
			U11
			</td>
			<td>
			101
			</td>
			<td>
			47
			</td>
			<td>
			-262
			</td>
			<td>
			6
			</td>
			<td>
			451
			</td>
			<td>
			24
			</td>
			<td>
			1.1
			</td>
			<td>
			4.3
			</td>
		</tr>
<tr>
<td>
			OCBC
			</td>
			<td>
			O39
			</td>
			<td>
			88
			</td>
			<td>
			52
			</td>
			<td>
			-2
			</td>
			<td>
			4
			</td>
			<td>
			125
			</td>
			<td>
			17
			</td>
			<td>
			1.0
			</td>
			<td>
			4.6
			</td>
		</tr>
<tr>
<td>
			Total
			</td>
			<td>
			 
			</td>
			<td>
			345
			</td>
			<td>
			180
			</td>
			<td>
			-951
			</td>
			<td>
			 
			</td>
			<td>
			1,748
			</td>
			<td>
			 
			</td>
			<td>
			 
			</td>
			<td>
			 
			</td>
		</tr>
<tr>
<td>
			Average
			</td>
			<td>
			 
			</td>
			<td>
			 
			</td>
			<td>
			 
			</td>
			<td>
			 
			</td>
			<td>
			3
			</td>
			<td>
			 
			</td>
			<td>
			25
			</td>
			<td>
			1.2
			</td>
			<td>
			4.4
			</td>
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</tbody></table>
Source: SGX, Bloomberg, Refinitiv (Data as of 27 July 2022)

 

Pending 1H22 Financial Results

The trio are scheduled to report 1H22 results from tomorrow, with UOB reporting prior to the Fri 29 July open, OCBC reporting prior to the Wed 3 Aug open, and DBS reporting prior to the Thu 4 Aug open. Key numbers within the reports that the market will be looking at include the magnitude of net interest margin (NIM) expansion, non-interest income and also credit costs. NIMs will be largely determined by the average rate paid on the liabilities versus with the average rate received on the assets of the banks and the compounded 1M SORA has moved from 21 bps at the end of 2021, to 99 bps at the end of June 2022.

For 1Q22, the combined Net Interest Income (NII) for the three banks was S$5.38 billion, up S$70 million from S$5.31 billion in 4Q21. The combined NII of the trio has seen QoQ gains for the past six consecutive quarters from 4Q20 through to 1Q22. 

Aside from the impact of NIMs on NII, NII is also driven by the size of bank loan books, which can obviously be impacted by growth outlooks. Compared to 4Q21, the trio of banks also saw a bigger QoQ increase in non-interest income in 1Q22, supported by wealth management and digitalisation initiatives. Combined non-interest income of the trio amounted to S$3.37 billion in 1Q22, up S$400 million from S$2.97 billion in 4Q21.

 

Daily Leveraged Certificates (DLCs) for Short-Term Trading Within the Singapore Banking Sector 

The DLCs also provide a platform for spread trading between the banks, for investors that anticipate convergence or divergence in share prices. For instance between the session closes of Friday 15 July and Tuesday 19 July, the share price ratio spread of UOB to DBS reverted from one standard deviation below the mean share price ratio spread, back up to the mean. Specifically, at 0.8777 on 15 July, the share price ratio spread of UOB to DBS crossed back above the 0.8765 threshold that then represented one standard deviation below the rolling one-month mean, with the rolling mean at 0.8850. Over the ensuing two trading sessions, the price ratio spread of UOB to DBS continue to rise, reverting to just above the rolling one-month mean.

DLCs are financial instruments issued by third-party financial institutions and listed for trading in Singapore. Three of the most traded Daily Leverage Certificates (DLCs) that track the performance of the trio of banks this month have been the 5x Long UOB (DHBW), the 5x Long DBS (DKBW) and the 5x Short DBS (DLDW).  

Designed for Specified Investment Products (SIP)-qualified investors, DLCs seek to achieve short-term investment results that correspond to the daily magnified performance of the underlying stock.
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 <div class='content-caption'>Daily Leveraged Certificates (DLCs) for Short-Term Trading Within the Singapore Banking Sector </div>
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<html><body>On 19 July, the price ratio spread of UOB to DBS closed at 0.8835, with the rolling one-month mean at 0.8826. SIP-qualified investors that took even exposure in the 5x Long UOB (DHBW) DLC and the 5x Short DBS (DLDW) over the period would have booked a return of 1.5%, with the Long UOB (DHBW) DLC gaining 7.8% from 0.335 to 0.361, and the 5x Short DBS (DLDW) declining 4.8%, from 1.558 to 1.484. Note this is a theoretical return based on past prices and does not take into account transaction fees and taking the opposite positions over the three sessions would have generated a comparable loss. For a more comprehensive overview of DLCs, including risks, click <a href="https://www.sgx.com/research-education/securities-products#Daily%20Leverage%20Certificates">here</a>.</body></html>





This year the trio of DBS, UOB and OCBC have contributed more than 25% of the average daily turnover of the Singapore stock market, while averaging a 3% YTD total return following the 25% average total return in 2021. Institutions have also been net sellers of the trio in the 2022 YTD, following on from net buying in 2021. 



The trio are scheduled to report 1H22 results from tomorrow, with UOB reporting Fri 29 July , OCBC on Wed 3 Aug, and DBS on Thu 4 Aug – all prior to market open.



The trio’s combined NII has generated consecutive QoQ gains for the past six quarters from 4Q20 through to 1Q22. Key details with the reports that the market will be looking for include the magnitude of NIM expansion, non-interest income and also credit costs. During 1H22, Singapore’s compounded 1M SORA gained close to 80 bps. 
	 

DBS, UOB, OCBC Avg. 3% YTD Total Returns, Outperforming 3% Decline for Global Peers

In the 2022 year-to-date, DBS Group Holdings ("DBS"), United Overseas Bank ("UOB") and Oversea-Chinese Banking Corp ("OCBC") have ranked as the most traded Singapore stocks, contributing 27% of the day-to-day turnover of all stocks listed for trading in Singapore.

During the year, the trio averaged a 3% total return, in contrast to the top quartile of global bank stocks by market value which have declined 3% in SGD terms. Following S$1.7 billion of combined net institutional inflows in 2021, the trio all continued to attract net institutional inflows in the first two months of 2022, before global growth concerns weighed the global sector, which has seen the trio draw just over S$950 million of net institutional outflows in the 2022 year through to 27 July. Retail investors, on the other hand, net bought slightly over S$1.32 billion of the trio in the 2022 YTD. The individual performances are tabled below. 




			Stock
			
			
			Code
			
			
			2022 YTD AVG Daily Trading T/O
			
			
			Mkt Cap (S$B)
			
			
			2022 YTD Net Insti Flow (S$M)
			
			
			YTD Total Return %
			
			
			2021 Net Insti Flow (S$M)
			
			
			2021 Total Return %
			
			
			P/B (x)
			
			
			Ind Div. Yield %
			
		


			DBS
			
			
			D05
			
			
			156
			
			
			81
			
			
			-687
			
			
			-1
			
			
			1,172
			
			
			35
			
			
			1.4
			
			
			4.4
			
		


			UOB
			
			
			U11
			
			
			101
			
			
			47
			
			
			-262
			
			
			6
			
			
			451
			
			
			24
			
			
			1.1
			
			
			4.3
			
		


			OCBC
			
			
			O39
			
			
			88
			
			
			52
			
			
			-2
			
			
			4
			
			
			125
			
			
			17
			
			
			1.0
			
			
			4.6
			
		


			Total
			
			
			 
			
			
			345
			
			
			180
			
			
			-951
			
			
			 
			
			
			1,748
			
			
			 
			
			
			 
			
			
			 
			
		


			Average
			
			
			 
			
			
			 
			
			
			 
			
			
			 
			
			
			3
			
			
			 
			
			
			25
			
			
			1.2
			
			
			4.4
			
		

Source: SGX, Bloomberg, Refinitiv (Data as of 27 July 2022)

 

Pending 1H22 Financial Results

The trio are scheduled to report 1H22 results from tomorrow, with UOB reporting prior to the Fri 29 July open, OCBC reporting prior to the Wed 3 Aug open, and DBS reporting prior to the Thu 4 Aug open. Key numbers within the reports that the market will be looking at include the magnitude of net interest margin (NIM) expansion, non-interest income and also credit costs. NIMs will be largely determined by the average rate paid on the liabilities versus with the average rate received on the assets of the banks and the compounded 1M SORA has moved from 21 bps at the end of 2021, to 99 bps at the end of June 2022.

For 1Q22, the combined Net Interest Income (NII) for the three banks was S$5.38 billion, up S$70 million from S$5.31 billion in 4Q21. The combined NII of the trio has seen QoQ gains for the past six consecutive quarters from 4Q20 through to 1Q22. 

Aside from the impact of NIMs on NII, NII is also driven by the size of bank loan books, which can obviously be impacted by growth outlooks. Compared to 4Q21, the trio of banks also saw a bigger QoQ increase in non-interest income in 1Q22, supported by wealth management and digitalisation initiatives. Combined non-interest income of the trio amounted to S$3.37 billion in 1Q22, up S$400 million from S$2.97 billion in 4Q21.

 

Daily Leveraged Certificates (DLCs) for Short-Term Trading Within the Singapore Banking Sector 

The DLCs also provide a platform for spread trading between the banks, for investors that anticipate convergence or divergence in share prices. For instance between the session closes of Friday 15 July and Tuesday 19 July, the share price ratio spread of UOB to DBS reverted from one standard deviation below the mean share price ratio spread, back up to the mean. Specifically, at 0.8777 on 15 July, the share price ratio spread of UOB to DBS crossed back above the 0.8765 threshold that then represented one standard deviation below the rolling one-month mean, with the rolling mean at 0.8850. Over the ensuing two trading sessions, the price ratio spread of UOB to DBS continue to rise, reverting to just above the rolling one-month mean.

DLCs are financial instruments issued by third-party financial institutions and listed for trading in Singapore. Three of the most traded Daily Leverage Certificates (DLCs) that track the performance of the trio of banks this month have been the 5x Long UOB (DHBW), the 5x Long DBS (DKBW) and the 5x Short DBS (DLDW).  

Designed for Specified Investment Products (SIP)-qualified investors, DLCs seek to achieve short-term investment results that correspond to the daily magnified performance of the underlying stock.



      
    
    Daily Leveraged Certificates (DLCs) for Short-Term Trading Within the Singapore Banking Sector 

On 19 July, the price ratio spread of UOB to DBS closed at 0.8835, with the rolling one-month mean at 0.8826. SIP-qualified investors that took even exposure in the 5x Long UOB (DHBW) DLC and the 5x Short DBS (DLDW) over the period would have booked a return of 1.5%, with the Long UOB (DHBW) DLC gaining 7.8% from 0.335 to 0.361, and the 5x Short DBS (DLDW) declining 4.8%, from 1.558 to 1.484. Note this is a theoretical return based on past prices and does not take into account transaction fees and taking the opposite positions over the three sessions would have generated a comparable loss. For a more comprehensive overview of DLCs, including risks, click here.


Singapore Banks Begin Reporting 1H22 Results Tomorrow 