Bankruptcy orders in Singapore continues to decline and Hong Kong mortgage delinquency ratio remains low at 0.02%. In the offshore oil and gas sector, semi-submersibles utilisation could be bottoming out and jackups utilisation has recovered to levels last seen in 2015. However, day rates continue to languish at an all-time low.
In Oct, Singapore domestic business loans grew 9% driven by strong property-linked business loans as other business loans stayed relatively stable. Building and construction loans grew 0.9% while car loans posted 4.5% y-o-y growth, the highest since the start of 2013. Hong Kong 2Q and 3Q domestic loans registered 10.6% and 12.6% growth respectively as property-linked loans accelerated.
Hong Kong mass market residential values are up 13.1% year-to-date and is expected to grow 15% for FY17, according to JLL Hong Kong. Outstanding value of mortgage loans continue to climb, increasing 0.3% m-o-m to HK$1.19 trillion ($206 million) at end of October. Loan growth was also driven up by a buoyant IPO loans market at the end of October in preparation for mega IPOs like China Literature and Yixin Group in early November.
“Our channel checks show that the Singapore banks’ fixed rate home loan packages have risen in December from a month ago. But we did not notice big changes to the spread on Sibor pegged loans,” says lead analyst Jeremy Teong in a Friday report.
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“We believe that part of the strong spike in one-month Hibor was due to the strong demand for IPO loans which soaked up a substantial amount of liquidity in the short duration money market,” adds Teong.
Most of Hong Kong’s new mortgages continue to be referenced to Hibor. In October, 93.1% of new mortgages within Hong Kong were priced with reference to Hibor, a slight decline from September’s 93.4%.
Phillip has target prices of $29.30, $13.48 and $25.22 for DBS Group Holdings, Oversea-Chinese Banking Corp and United Overseas Bank. DBS is trading at $24.97, $12.47 and $26.50. Valuations of the three banks are pegged at between 1.1 and 1.2 times book value.
