Strong balance sheets, regional integration and a wide suite of tech-enabled services have made Singapore banks the best positioned to support Chinese supply chain relocation to ASEAN nations.
Malaysian lender Maybank recently released a report commending the relative advantages held by Singapore’s «big three» banks – DBS, UOB and OCBC. In addition to a stronger credit rating, the three Singaporean lenders’ U.S. dollar funding mix has increased from 2013’s 14 percent to 30 percent last year, 22 percentage points higher than the average amongst large regional banks.
Rising labor costs in China, attractive investment incentives and ongoing political uncertainty have driven the relocation of supply chains not only to improve profitability but also to hedge against future risks. As a reference, U.S. imports from China fell 15 percent from January to October 2018 but increased 11 percent from ASEAN in the same period.
ASEAN Winner: UOB
According to the report, UOB stands to be the greatest beneficiary due to «high levels of regional integration and a proven cross-border execution track record». Rival OCBC will also benefit but its longer-term sustainability will be dependent on the successful delivery of its Greater Bay strategy to connect North Asia and Southeast Asia trade flows.
In addition, Singapore’s big three will benefit from the significant tech investments made in recent years to upgrade core banking systems, integrate regional operations and develop big data and artificial intelligence capabilities.
