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DBS, OCBC and UOB shares slip as central bank cuts dividends: where next?

Shares of Singapore’s three main banks fell over 3% each on Thursday (30 July 2020) morning, after Singapore’s central bank placed a cap on dividend pay-outs for the 2020 financial year. As at 10:00 SGT on Thursday, DBS Group’s share price is down by 3.2%, Oversea-Chinese Banking Corporation’s (OCBC) descended 4.27%, while United Overseas Bank’s…

DBS, OCBC and UOB share price: What’s the latest?

Shares of Singapore’s three main banks fell over 3% each on Thursday (30 July 2020) morning, after Singapore’s central bank placed a cap on dividend pay-outs for the 2020 financial year.

As at 10:00 SGT on Thursday, DBS Group’s share price is down by 3.2%, Oversea-Chinese Banking Corporation’s (OCBC) descended 4.27%, while United Overseas Bank’s (UOB) fell 3.13%.

Meanwhile, the wider stock benchmark – the Straits Times Index – is also down by 2.34%, its steepest decline in three weeks.

Why did the banks’ shares decline on Thursday?

In a press release posted on 29 July 2020, the Monetary Authority of Singapore (MAS) called on locally-incorporated banks headquartered in Singapore to cap their total dividends per share (DPS) for FY2020 at 60% of FY2019’s DPS.

A 60% cap on FY2019 DPS would mean that DBS Group’s FY2020 DPS will max out at S$0.738 (based on 2019’s pay-out of S$1.23), OCBC’s FY2020 DPS will be around S$0.318 (FY2019: S$0.53), while UOB’s FY2020 DPS will end up around S$0.78 (FY2019: S$1.30).

MAS also advised local banks to offer shareholders the option of receiving the dividends to be paid for FY2020 in scrip in lieu of cash.

Are you looking to buy long or short sell DBS Group, OCBC and UOB shares? Start today by opening a live or demo IG account.

MAS said that the dividend restrictions are a pre-emptive measure to bolster the banks’ resilience and capacity to support lending to businesses and individuals through an uncertain period ahead for our economy.

‘We are fortunate that banks in Singapore entered the Covid-19 pandemic with strong capital positions,’ said Ravi Menon, Managing Director, MAS.

‘All the same, MAS wants to ensure the banks’ capital buffers remain ample in the face of significant uncertainties ahead, so that they can sustain lending to the economy. We have carefully calibrated the restriction on dividends, taking into account the needs of investors who may rely on this income,’ he added.

The 60% cap on Local Banks’ FY2020 dividends is intended to help banks balance the objective of capital conservation with the interests of shareholders, the central bank further noted.

Where do analysts see Singapore banks’ share price going?

IG market strategist Pan Jingyi said in a client note that although MAS’ advisory had perhaps been a milder recommendation compared to other central banks’ orders, this would ‘nevertheless diminish the attractiveness of (Singapore banks’) shares in the short-term if adopted’.

She added that the earnings of DBS Group, OCBC and UOB, to be reported next week, will be ‘one to scrutinise’, in light of the latest developments.

As OCBC investment analysts themselves noted: ‘The 60% cap on FY19 dividends for the sector translates to lower estimated dividend yields of +3.6% and +3.9% for DBS and UOB respectively, based on yesterday’s closing prices of S$20.40 and S$20.02.’

As for OCBC, dividend yields will fall to roughly 3.6% – based on Wednesday’s closing share price of S$8.92.

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For now, Refinitiv data show that all three banks’ stocks currently have consensus broker ratings of ‘buy’ from 18 analysts.

In terms of share price targets (based on six ratings each), DBS Group has an average estimate of S$20.83 per share, OCBC received a target of S$9.43, while UOB’s stood at $20.66.

In terms of individual trading activity so far on Thursday, ‘buys’ form 62% of all trades on IG’s DBS counter, with OCBC seeing 63% of all client trades placed on ‘buy’ (long positions) and UOB’s ‘buy’ volume at 72% of all trades.

How to trade DBS, OCBC and UOB with IG

Are you feeling bullish or bearish on Singapore bank stocks? Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG’s industry-leading trading platform in a few easy steps:

  1. Create a live or demo IG Trading Account, or log in to your existing account
  2. Enter <DBS Group Holdings Ltd>, <Oversea-Chinese Banking Corp Ltd> or <United Overseas Bank Ltd> in the search bar and select the instrument
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade
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Donald Trump blasts ‘fools’ who oppose good Russian ties

US President-elect Donald Trump has posted a progression of tweets censuring the individuals who contradict great relations with Russia as “‘dumb’ individuals, or nitwits”.

Mr Trump promised to work with Russia “to comprehend a portion of the numerous… squeezing issues and issues of the WORLD!”

His remarks came after an insight report said Russia’s leader had attempted to help a Trump race triumph.

Mr Trump said Democrats were to be faulted for “gross carelessness” in permitting their servers to be hacked.

In a progression of tweets on Saturday, Mr Trump said that having a decent association with Russia was “no terrible thing” and that “lone “idiotic” individuals, or simpletons, would believe that it is awful!”

He included that Russia would regard the US increasingly when he was president

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Bulls and Bears Took on More Currency Exposure in Week Through January

he most striking improvement among theoretical situating toward the finish of a year ago and the primary session of 2017 is not that modification were little. There was just a single gross theoretical position modification of more than 10k contracts. With sterling apparently not able to maintain even humble upticks, the bears added 13.1k contracts to the gross short position, lifting it to 120.2k contracts.

Or maybe, it is eminent that examiners for the most part added to positions, long and short, as opposed to close positions at the very end of the year. Examiners added to net long outside cash prospects positions, aside from in the Japanese yen and Swiss franc where 2.6k and 2.5k contracts were exchanged separately. Examiners likewise added to gross short positions. Here there was just a single exemption, the Japanese yen. Despite the fact that the dollar shut comprehensively higher in front of the end of the week, every one of the monetary forms we track here, spare the Mexican peso, picked up against the dollar in the three sessions since the finish of the CFTC reporting period.

Every once in a while it is helpful to review why many market members take a gander at the theoretical situating in the cash fates advertise. It is not that the outside trade is essentially a prospects showcase. It is principally an over-the-counter market in which every day turnover midpoints in abundance of $5 trillion a day.

Trade exchanged monetary forms and alternatives represented around 3% of the normal day by day turnover as indicated by the BIS study. Be that as it may, past reviews have discovered some contemporaneous connection between’s market heading and net position changes. We think it additionally offers knowledge into a specific market section of pattern supporters and energy brokers. It is not by any means the only device, yet one of a few data sources.

One ramifications of this is albeit theoretical positions in the money fates market are moderately extensive, it is still little contrasted and the money showcase. Along these lines, it is difficult to see the genuine essentialness of a record vast position, as though there is some market top. At some point, examiners are not driving the costs, possibly there is another fragment, national banks, enterprises, as well as genuine cash that is more essential at any given minute.

We invest some energy taking a gander at gross positions instead of just net theoretical positions, which is the more customary approach. We think a more granular look is frequently fundamental. There is a distinction between short-covering, for instance, and new purchasing, however it appears to be identical in the net. Additionally, the gross position is the place the introduction is not the net position. A net position of zero does not mean the market is nonpartisan. Net positions could be huge, which implies a short press or a negative stun could in any case troublesome. The positions that must be balanced are captured in the gross measure not the net figure.

We find numerous customers are likewise keen on theoretical situating in the US Treasuries and oil. The net and gross short theoretical Treasury position has swelled to new records. The bears added 23.8k contracts to the as of now record net short position, lifting it to 616.2k contracts. The bulls attempted to pick a base and added about 20k contracts to the gross long position, which now remains at 471.2k contracts. These modification prompted to a 3.8k contract increment in the net short position to 344.9k contracts.

The bulls delayed in the oil prospects toward the finish of 2016. They exchanged short of what one thousand contracts, leaving 608.1k gross in length contracts. The bears added 4.1k contracts to the gross short position, giving them 168k. These conformities trimmed the net long position by very nearly 5k contracts to 440.1k.

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3 ways to profit in the ‘year of the dollar’

In December, the Federal Reserve raised loan fees for the second time since the Great Recession and included the desire of a 2017 financing cost climb to its gauge. Furthermore, only a couple days prior, the abundantly anticipated minutes from the most recent Fed meeting demonstrated the most hawkish tone from the national bank in two years.

In the meantime, Europe has been dove into political turmoil after a year ago’s Brexit vote and the later abdication of Italy’s leader. Somewhere else, the Bank of Japan proceeds down the way of negative rates and forceful security purchasing.

Put it all together, and it isn’t astounding that the U.S. Dollar Index is up against 14-year highs.

Speculators may have missed so much discussion on account of babble about the Dow Jones Industrial Average at the end of the day almost hitting 20,000. Be that as it may, paying little respect to your assignment to stocks or your venture skyline, this sort of huge picture incline in the dollar implies right now is an ideal opportunity to position your portfolio to benefit and, maybe most critical, to keep away from a portion of the pitfalls that can originate from a solid local cash.

Here are a couple ideas dollar exchanges ought to consider:

Residential plays over multinationals

There’s a considerable measure of seek after shopper stocks in 2017 on account of an enhancing work market and any desires for a jolt under a GOP-controlled Congress and President Donald Trump. In any case, remember that not all retailers are made equivalent especially those with abroad operations that are adversely affected by the wide dissimilarity in monetary standards at this moment.

For example, retailer Wal-Mart Stores Inc.(WMT) said troublesome money trade rates shaved very nearly 2.5% off profit for each partake in the second quarter of 2016. On the other hand consider that in the monetary final quarter of 2016, athletic attire goliath Nike Inc.(NKE) saw its income development cut down the middle because of forex weights, from 12% year-over-year in consistent cash measures to only 6% including real money changes.

To take advantage of the “reflation” exchange that numerous financial specialists are counts on in 2017, you need to represent the headwinds that a solid dollar are making for multinationals at this moment. The most ideal approach to do that is to consider customer plays that do by far most of their business here in the U.S. – for example, Foot Locker Inc.(FL), which has been an uncommon splendid spot in retail throughout the most recent couple of years.

Supported money ETFs

Obviously, in the event that you need a steady portfolio, you can’t just purchase just local centered values. Geographic expansion is similarly as imperative as enhancement crosswise over parts and resource classes. Such a large number of financial specialists keep on holding worldwide plays in light of a legitimate concern for a balanced portfolio, regardless of the possibility that it implies battling a daunting struggle as a result of a solid dollar.

The uplifting news, notwithstanding, is that you don’t need to leave yourself to torment through a solid dollar and a powerless euro when you put resources into Europe. Nor do you need to stress over the yen-dollar conversion standard when you put resources into Japan. That is on account of there’s an entire group of cash supported ETFs to permit financial specialists to put their cash in outside business sectors yet keep away from forex issues.

Consider that Japan’s Nikkei 225 file is up around 25% from its July 2016 lows. The WisdomTree Japan Hedged Equity Fund(DXJ) is up 35% in a similar period on account of assurance from forex issues and a somewhat better-performing rundown of stocks – while the non-supported iShares MSCI Japan ETF(EWJ) is up only 10% in a similar period because of battling a difficult task against a solid dollar.

In the event that you need to differentiate your portfolio comprehensively, you ought to consider supported assets that incorporate the Japan-centered DXJ, the WisdomTree Europe Hedged Equity Fund(HEDJ) to play Europe or the iShares money Hedged MSCI EAFE ETF (HEFA) for developing markets.

Dollar list ETF

In the event that you are searching for an immediate play on a rising dollar as opposed to putting resources into stocks, figuring out how to exchange remote trade can appear like an overwhelming undertaking. Gratefully, there’s the PowerShares DB US Dollar Index Bullish Fund(UUP).

This ETF is attached to the U.S. Dollar Index, which is a measure of the greenback against a wicker container of other worldwide monetary standards including the yen and the euro. It’s a straight money play, however that doesn’t make it straightforward or hazard free. In the event that the dollar debilitates, you’ll lose cash similarly as though you’re putting resources into a stock that has fallen on difficult circumstances. Furthermore, obviously, PowerShares takes a little cut of your speculations en route that indicates 0.8% yearly, or $80 a year on each $10,000 contributed.

Still, in the event that you need to conjecture on the dollar or support against a solid U.S. cash keeping down other worldwide ventures on your rundown, it’s maybe the least demanding approach to do as such for generally financial specialists.

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