Banks bear brunt of market bloodbath

They have declined by over 10% since RMB woes began.

Singapore’s three largest banks have suffered painful losses since the RMB’s devaluation on August 11. In the space of two weeks, the banks have lost over 10% of their value, wiping out over $14b off their combined market capitalisations.

Data from Bloomberg show that OCBC has declined the most since the sell-off began, losing 13.7% of its value since the second week of August. OCBC declined 4.4% yesterday, extending over a week of continuous losses.

UOB, meanwhile, has seen its share price decline by 11.07% since the bloodbath began. UOB lost 2.09% yesterday, and now has a one-year return of -14.64%.

DBS has declined 10.5% since the start of the selldown, slipping from $19.73 per share on August 11 to $17.65 per share on August 24.

Analysts note that banks suffered the worst sell-offs because the RMB devaluation has triggered fund outflows.

“[Banks] have been sold down most after Rmb devaluation concerns stoked fears of currency wars,” said Kenneth Ng, analyst at CIMB. “These moves are more due to global investment flows, as worries of Asian currencies devaluation, in line with Rmb, are causing a flight to safety back to US assets.”

“The current environment is fragile for risk assets, and Singapore’s poor corporate reporting season does little to improve matters. For investors who need to choose between Singapore stocks in a portfolio, our preference would be the large-cap stocks, after the sell-down in banks and property,” Ng said.