The Point for Asia Pacific

Research evidence excerpt

The Point for Asia Pacific

Singapore Banks - Street likely euphoric on NII/SORA; D/G OCBC to Neutral

We d/g OCBC to Neutral, eight months after upgrading to Buy in Nov-25, despite

expecting 2Q26e to beat. We view (i) better growth prospect is largely priced in

with dividend yield spread vs bond yield now <1% (vs pre-pandemic sector avg

~1.5%). (ii) Flows factor largely done, as investors likely have circumvented

technical UW in DBS due to single-stock limit through OCBC, based on our

channel checks. YTD-26 OCBC +50% vs DBS +33% vs UOB +25%. (iii) Possibly

NIM disappointment due to fixed rates asset repricing lower and spot SORA

normalizing to <1.0% vs Street recent euphoric NII/NIM forecast. Sector view: We

keep Buy on DBS with OCBC/UOB Neutral-rated, implying our neutral view on SG

banks on valuations and expectations. Despite trading at ~2.9x 27e 12mf P/B, we

see upside to ROE if 2025-30e AUM can grow at ~11% CAGR (link), which could

see payout ratio positive surprises.

Yong Hong Tan

Spot SORA normalized lower – a risk to Street SG banks relative performance – OCBC

euphoria on rates. Fixed rates assets repricing outperformed on fundamental upgrades but

another risk also flows benefit due to investors’ technical

UW in DBS

Country Top Calls

Japan FX - How will adjustment in Japanese stocks impact the USDJPY?

Historic highs for Japanese equities have caused portfolio rebalancing and hedge

transactions by investors both in Japan and overseas, and this has likely amplified

JPY weakness. Recently the Nikkei 225 has corrected, but TOPIX has stayed high.

The situation in the forex market is such that there will not likely be a reaction

toward JPY appreciation. The tendency since 2024 has been for JPY appreciation

to gain momentum when TOPIX corrects by more than 10%.