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It is just a technical rebound from 52 weeks low. Maybe if punters are lucky, it will hit $19 resistance.
But long term outlook not as rosy as the other 2 banks.
Actually I think the big funds are underweight (and will continue to underweight) on the SG banking sector, possibly favouring OCBC abit more than the other 2 banks due to the interest rate and property issues.
I think they are currently overweight (and will continue to be overweight) on energy, look at KepCorp, Sembcorp and Sembmarine running as well as some congleremates look at F&N and C&C outperforming.
Going up steadily. It may touch $18.50 tdy..
Ha, there is a difference of control of business with regards to insurance for OCBC and UOB.
UOB is an agent for Prudential similar to a franchisee. It has no control over the insurance business and growth strategies and only rely on fee and commission income based on the distribution.
OCBC on the other hand Controls Great Eastern which is a leading insurance player in SG and Malaysia. It can implement strategic moves, new products, have full control over pricing schemes and can make strategic acquisitions as it sees fit. In the insurance market, OCBC is like a Kopitiam owner whereas UOB is like renting a stall in the Kopitiam.
As for wealth management business, whether the banks manages the wealth of the customers to their expectations is a totally different matter from the amount of income they can derive from this business segment. The banks can cause the clients to lose money, but bottom line is that the bank makes tons of money by managing the wealth of the extremely rich regardless of the fact that the clients make or lose money.
Shareholders look at whether the wealth management private banking business of the bank is highly profitable and can contribute to ROE.
Shareholders do not look at whether the private banking clients of the bank are actually making money or not, it is not their concern.
Of course you can argue if the bank makes you lose money, then you will lose confidence and the private banking income will suffer. But bottom line is that the ultra rich needs someone to manage their excess funds in the millions or billions and who can say which foreign bank can manage better than OCBC and will not cause you to make a loss. As you say Citigroup wealth management may not be better than OCBC,
Although UOB has sold UOB Life to Prudential, they have a bancassurance agreement with Prudential. This is a shrewd move by UOB as they still have a stake in the insurance business but without the full commitment of resources in a full insurance business. It is a different model but the bank contimues to enjoy comissions from insurance sales via its distribution network. In any case, except for health insurance, general insurance is a saturated business and not something to shout about as our population reaches its peak and starts to grey. At our age and finanicial situation, we need less or no insurance.
As for wealth management, UOB is indeed lagging OCBC but I think banking business in this region does not have the ability to manage our money well. Just look at how Citibank's case with tycoon, Oei Hong Leong. There were also many other reports of private bankers who caused the assets of the private banking customers to dwindle to almost nothing. I for one would prefer to invest my own money then to leave it to a private banker. So in a nutshell, I think the whole wealth management business is overrated, at least for banks.
Actually this is the risk that Singapore banks face and weighing on their share prices.
The loan book for the Sg banks for property has grown from below 30% several years ago to 50% currently at end 2010.
It is very risky for the banks to put all their eggs in one basket or rather all their loans on property, diversification is the key to managing risks.
However, the banks have no choice, manufacturing sector is dwindling in Singapore despite the govt's best efforts and so are manufacturing loans.
Construction is slowing down after the 2 IRs are completed as well as the recent anti speculation moves on property.
The SG banks have to way to maintain their loan books and have no choice but to squeeze into the property loan market.
This proves to be the Archilles heel for SG banks and their share price as we all know the US banks collapse due to the sub-prime crisis which is closely linked to loans to the property and real estate market when the US property bubble burst in 2007. Property prices are highly sentiment driven and extremely illiquid and considered very high risk for the SG banks. When property prices plunge rapidly, it will be very difficult to find a buyer even if you are trying to sell at a huge discount to valuation and valuation will drop every day.
good analysis.
but just one comment.... housing and car loan are a big part of singaporean lifestyle.... stable income ?
brother, not to disagree with you, just open a channel for discussion.... i maybe wrong.
goondoo ( Date: 30-Dec-2010 09:11) Posted:
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You missed the point entirely. The stock market is dynamic and this is just for short term analysis. Of course, the equilibrium price will change when there is external shocks or change in fundamentals.
goondoo ( Date: 30-Dec-2010 08:58) Posted:
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Oh another comment on interest rates.
Those familiar with Singapore economics knows that Singapore manages exchange rates and leave interest rates to fluctuate as per global interest rates which is heavily influeneced by US and EUR rates.
US interest rates are near zero and EUR interest rates are about 1%. Reason for low interest rates is to prevent economy from slipping back to recession by stimulating consumption (US rely growth on domestic consumption). But after interest rates stay at 0% to 1 % for about 2 years, US growth remains sluggish and way below inflation and unemployment remains at historical high, ditto for Europe.
If you look at Japan, it has been in stagnation for about 20 years and interest rates has stayed around 0% for about 20 years without lifting the economy or unemployment rate.
Chances are the US and Europe will follow Japan footsteps in what is known as the lost decade or rather 2 lost decades. Therefore there is a high chance that interest rates will hover near zero for US and Europe and in turn Singapore for the next 20 years.
Perhaps this has been factored into UOB share price as UOB rely heavily on interest income. OCBC on the other hand has a more diversified business on insurance and private banking (when it bought ING private banking) so the zero interest rate damage to OCBC is far less than UOB.
OCBC is trying to expand using it's equity to buy busineses with growth potential like ING private banking, consolidating it's Great Eastern a few years back.
UOB on the other hand is hoarding capital trying to raise Tier 1 capital to levels much higher than DBS and OCBC and selling off assets (UOB insurance arm then UIC) but not actively looking to buy assets to expand. Therefore in a nutshell, UOB is down sizing while OCBC is expanding agressively.
Market is digesting new information everyday and factoring them into the bank's share prices which explains their historical movement and future movement.
I guess I have been excessively longwinded and shall stop here.
ha ha....
goondoo ( Date: 30-Dec-2010 08:58) Posted:
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Ha, very funny logic about equilibrium price.
Creative Technologies used to be a $20+ stock but now hovers way below $10. Can you say the equilibrium price has changed?
Citigroup used to hover about US$50 for many years but now fluctuates about $4. So how do you determine the equilibrium price?
Genting used to be a penny stock but is very stable at $2+ now.
Wilmar started as a $1 stock but is about $6 now.
The only thing we can say is that market forces responds to the company's profit and future prospects and prices the stocks according to their expectations.
And market expectations for the past 6 months is STI and OCBC has risen 10%, UOB has fallen 10%.
UOB used to have a market cap 10% bigger than OCBC but now OCBC is almost 20% bigger than UOB all within a span of 6 months.
The only thing I can say is that the market forces out there has very bleak expectations of UOB and is dumping the stock as they probably has access to some really bad information that we do not know.
So it is really highly possible that OCBC continue to rise and break new highs (like Genting and Wilmar) and UOB continue to hit 52 week lows.
krisluke ( Date: 29-Dec-2010 23:25) Posted:
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i prefer ocbc (logo), personal kind od thingy : )
IMHO, both OCBC and UOB have growth potential in their own regards.
It all depends on individual trading strategy i.e. how long u want to (or rather are capable of) hold each stock, ur entry point, how u react to market conditions / news, etc.
OCBC is more attractive if ur looking at price, but it has more or less broken thru its historical peak. So naturally there is resistance to rise further. BUT Credit Suisse already rate it as SG bank of choice in 2011 ahead of DBS and UOB. Assets-wise, it is the largest local bank by market capital.
UOB has reached peaks of $22-$23 in 2007 and hovered abt $20 in 2009 - 2010. Plenty of buyers out there are holding long at $19+ entry pt. And it has been neglected by BBs probably for abt a full quarter due to all the Yen/USD/China forex battles. I won't be surprised that as rates rise in 2011, we would see a rebound on this stock since it has been out of play for so long.
BOSAYOResearch (not RISK).
Prices will fluctuate but the equilibrium will still be the same unless there is an external shock or a change in fundamentals, so UOB will still move towards $19.
epliew ( Date: 29-Dec-2010 22:20) Posted:
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if ocbc is 9.8 then uob is ?
ktnpl2005 ( Date: 29-Dec-2010 21:34) Posted:
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UOB's equilibrium price is around $19 while OCBC's is around $10.
No matter how much data crunching each of us do, the prediction is only as good as our assumptions.
This rally will probably go on until 1st week of Jan 2011, so we shall know in a week's time which is the better stock.
goondoo ( Date: 29-Dec-2010 20:21) Posted:
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Oh! However one does the math, it will be interesting to see how this pans out. And the best is... that each invester/traders holding delivers within the individual's target. 
ocbc lousy stock. maybe on the verge of being eaten up by dbs. spore mkt only has room for 2 major local bank. do your sum properly. quoting from newspaper source.
Let us witness when UOB reaches $19 will OCBC be able to hit $11. Chances is that OCBC is hard to reach that level . It might even have problem to reach $10.50. This is just my opinion. UOB prices on the other hand, will reach $19 faster and even goes higher ..
If UOB go to $19, then OCBC will hit $11.
1 lot of UOB cost $19K and earn you less than $1k.
2 lots of OCBC cost $20K and earn you $2k.
Do your sums and you know that UOB is a lousy stock.