The Fed kept rates unchanged, markets cautious over potential US trade talks, STI rose for fourth consecutive week

Date: May 13, 2025

• The Fed kept rates unchanged as expected
• Wall Street cautious over trade talks, though there was some progress
• UOB reported flat 1Q profit of S$1.49b, suspended guidance
• DBS’s Q1 profit 2% down to S$2.9b, beats expectations
• OCBC’s 1Q profit down 5% at S$1.88b but beats expectations
• Banks set aside extra allowances to account for heightened tariff uncertainty
• Telcos enjoyed highest net institutional inflow in April: SGX Research
• 2Q’s best performers included CNMC Goldmine, Food Empire, Sheng Siong, Singtel: SGX Research
• Offer for Sinarmas Land raised by 21% after SIAS appeal

 

The STI posted its fourth consecutive weekly gain

As had been widely expected, the US Federal Reserve kept interest rates unchanged at its latest Federal Open Markets Committee (FOMC) meeting and emphasized uncertainty surrounding US trade policy and the economic implications, while saying Fed is in good position to let the situation evolve before taking any action.

In the local market the main focus were 1Q earnings, mainly by the banks. The figures were mixed, leading to a gain over the week for DBS but slight weakness for UOB and OCBC.

Boosted by rises in Singtel and ST Engineering, the Straits Times Index rose 31 points or 0.8% over the week to 3,876.16. It was the index’s fourth successive weekly gain. Average daily volume was S$1.22b, marginally below the S$1.27b of the previous week.

The Fed kept rates unchanged as expected

Risks to growth “haven’t materialized yet,” Fed chair Jerome Powell said. “We can afford to be patient, while knocking down any notion of taking pre-emptive rate cuts as inflation is still running above target.

“It’s not a situation where we can be pre-emptive, because we actually don’t know what the right responses to the data will be until we see more data,” Powell said.

Powell said US negotiations with key trade partners could have a material impact on the economic outlook, after Trump imposed higher than expected tariffs that surprised even the Fed.

The futures market is currently pricing in a 16.5% chance of a rate cut at the June FOMC meeting.

Wall Street cautious over trade talks

Trading in the US was cautious with reports that most players seemed reluctant to make major bets before US Treasury Secretary Scott Bessent met with officials in Switzerland over the weekend.

“Trade war pessimism is fading, but the initial framework with the UK implies that falling below a 10% baseline tariff may be difficult,” said Citi strategist Scott T Chronert referring to a much-touted US-UK deal announced on Thursday.

Major US indices closed lower – the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite lost 0.16%, 0.47% and 0.27% over the week.

UOB reported flat 1Q profit of S$1.49b, suspended guidance

On Wednesday, UOB reported a net profit of S$1.49 billion for the first quarter ended Mar 31, 2025, unchanged from a year ago and said it will suspend its 2025 earnings guidance, with plans to resume this once the macroeconomic situation stemming from US tariffs stabilises.

Jefferies equity analysts Sam Wong, Chen Shujin and Joanna Cheah warned in a Wednesday note that the market could “react negatively” to the bank’s suspension of guidance for 2025.

They were correct – UOB’s shares fell S$0.49 or 1.4% down that day to S$34.49 on volume of 5.4m, though they rebounded on Thursday and Friday. For the week, the shares fell S$0.07 to S$34.83.

However, a strong balance sheet and capital base will help the bank navigate the uncertainties arising from US tariffs, said deputy chairman and chief executive officer Wee Ee Cheong who noted that trade forms only about 10% of the bank’s total loans portfolio, limiting its direct exposure.

“In fact, most of our trade finance lending continues to be done within the region, reflecting strong intra-regional activities,” he said, noting that 80% of the bank’s trades are “domestic business intra-region”.

Maybank in a 7 May report said it has raised its raise the multi-stage dividend discount model to S$35.21. “The timeframe for reaching UOB’s 14% ROE target is uncertain and so are operating conditions. However, the Group’s capital returns commitments are intact, delivering a dividend yield of 6.5% in 2025E. With this giving downside support, maintain HOLD’’ said the broker.

DBS’s Q1 profit 2% down to S$2.9b, beats expectations

DBS reported a 2% fall in Q1 net profit to S$2.9 billion due to higher tax expenses from the implementation of the 15% global minimum tax, beating the S$2.87 billion consensus forecast in a Bloomberg survey of eight analysts.

The bank declared a total dividend of S$0.75 a share for Q1, comprising an ordinary dividend of S$0.60 and a capital return dividend of S$0.15, up from S$0.54 a share in the year-ago period.

Chief executive Tan Su Shan said loan demand will remain strong in the first half of 2025, but warned that it may slow in the second half if the trade war persists.

The bank is projecting its full-year loan growth to be around 5 to 6% depending on how loan demand fares in the second half of 2025. Nevertheless, Tan expects DBS has other assets – which will be interest-bearing and have good return on equity (ROE) – that it can deploy its deposits into, even if loan demand falls, she said.

Maybank in an 8^th  May report noted that DBS’s management reiterated commitment to capital returns as per the original plan and that this, with share buybacks, should support dividend yields above 7% till 2027.

However, it said “the current operating conditions limits meaningful upside growth, too. Our multi-stage dividend discount model target price is raised to S$45.26 from S$38.48. Maintain HOLD’’.

For the week, DBS’s shares gained S$1.01 or 2.4% at S$43.71.

Telcos enjoyed highest net institutional inflow in April: SGX Research

In a 2 May Market Update, SGX Research said Singtel continued to record the most net institutional inflow in April. Both NetLink NBN Trust & StarHub also saw net institutional inflow in April, with the Telco Sector booking the most net inflow for the month.

“While the S-REIT Sector booked net institutional outflow of S$74 million in April, Frasers Centrepoint Trust, CapitaLand Ascendas REIT, CapitaLand Integrated Commercial Trust and Parkway Life REIT ranked among the 25 stocks that booked the most net institutional inflow for the month’’ reported SGX Research.

OCBC’s 1Q profit down 5% at S$1.88b but beats expectations

OCBC said net profit for the three months ended Mar 31, 2025, stood at S$1.88 billion, compared with S$1.98 billion from the year-ago period, narrowly beating the S$1.86 billion consensus forecast in a Bloomberg survey of five analysts.

OCBC has maintained all its 2025 financial targets, including net interest margin in the region of 2%, mid-single-digit loan growth and credit costs in the range of 20 to 25 basis points, noted chief executive Helen Wong.

Ms Wong told a results briefing that the bank still expects three rate cuts in the US this year but warned that the outlook may change, given market uncertainties.

“If the economic situation is going down, (which means) economic growth is lower, loan growth will be lower as well,” she said.

Net interest income for the quarter fell 4% to S$2.35 billion, due to a falling interest rate environment. NIM was down to 2.04% for the quarter, from 2.27% in the previous corresponding period.

Banks set aside extra allowances to account for heightened uncertainty

DBS, OCBC and UOB each said last week that they were setting aside allowances as a pre-emptive step to beef up their reserves as they navigate the impact of US tariffs and a possible economic slowdown, even as asset quality remains stable.

DBS took general allowances of S$205 million in Q1 to strengthen its reserves.

OCBC’s allowances rose 2 per cent on quarter to S$212 million, comprising S$94 million for impaired assets and S$118 million for non-impaired assets. Allowances for non-impaired assets were up due to changes in credit risk profiles and additional management overlays.

UOB’s total allowance increased to S$290 million in Q1 from S$212 million in Q4, as higher pre-emptive allowance was set aside to strengthen provision coverage.

2Q’s best performers included CNMC Goldmine, Food Empire, Sheng Siong, Singtel: SGX Research

In an 8 May Market Update, SGX Research said the STI generated a 1.1% decline in total return in 2Q25 through to 7 May and that over the period, institutions net bought S$92 million in stocks, while retail investors net bought S$904 million in stocks.

However, among the 100 most traded stocks in 2025, 10 stocks bucked the declines with double digit percentage returns.

“These 10 stocks included CNMC Goldmine, Food Empire, Sheng Siong, Singtel, Hongkong Land, ST Engineering, Frasers Hospitality Trust, Geo Energy Resources, Jardine Matheson and Top Glove Corp Bhd. The 10 stocks averaged 14% total return, doubling their average 2025 to May 7 total return to 28%’’ reported SGX Research.

Sinarmas Land’s offer price raised 21% after SIAS appeal

The offer to privatise Sinarmas Land on Sunday was raised 21% from S$0.31 to S$0.375. This was after the Securities Investors Association (Singapore) had advised shareholders to reject the initial offer as being too low and called for an upward revision.