Japan and Hong Kong investors eye alternatives to DBS stock

Some are concerned about the bank’s “relatively high” valuations.

According to CGS-CIMB, investors from Tokyo and Hong Kong that have Singapore investment mandates stuck to a few tried-and-tested benchmark names, mainly the banks DBS, OCBC, and UOB, and some other large firms.

CGS-CIMB analyst Lim Siew Khee noted that there were concerns over the banking space getting too crowded and risk of global fund flow exiting emerging ASEAN markets which could also have a negative spillover to Singapore.

“The most common questions asked on Singapore banks were 1) which bank is an alternative for DBS given its relatively higher valuations, 2) is the digitisation effort by DBS paying off and apparent and 3) how long will OCBC be the laggard?” Lim added.

As of writing, DBS plays at around 28.5 cents and above, whilst OCBC and UOB are at around 12.7 cents and 28 cents.

Investors were also unlikely to completely switch out of DBS given the relatively stronger return on equity (ROE) and its leading market share in the local property mortgage market.

“There were some investors who hedged the risk of DBS by owning a second laggard - UOB or OCBC,” she said.