Guess which lucky firms in Singapore will benefit from spiking interest rates

Banking sector must be very happy.

According to CIMB, should interest rates rise, winners in Singapore would be banks and companies with cash piles.

Here's more:

For Singapore, the potential winners are banks and companies with larger cash piles. The banks benefit from rising interest rates in a variety of ways.

Firstly, as 10-year SGS yields go up, large corporates will find it more expensive to raise money from the bond market. Banking disintermediation - the trend of corporates going to the bond market to borrow instead of banks - will unwind and banks will be able to price up business loans gradually.

With deposit rates sticky downwards, lending spreads will widen.

With rates as low as they are now, this is a trend that will pan out over time. Secondly, as the yield curve steepens, banks stand to make extra profit from gapping. We understand that the three Singapore banks have kept asset duration short for some time now due to the risk of rising rates.

The banks are not going to move to a position of longer duration immediately but they will certainly do so over time. This will have a beneficial effect on NIMs in the medium term.

Our screening of stocks under coverage with relatively high cash piles uncovered Overseas Education, F&N, SIA, Venture, Bukit Sembawang, Parkson Retail Asia, Sheng Siong and Biosensors.

Interestingly, developers that have been historically highly geared are now more likely to have big cash piles.