In addition, based on geopolitical tensions, weaker capital market activity is likely, with IPOs and secondary fund raisings possibly reconsidered. These could weigh on wealth management fees as as well as ECM/ DCM and investment banking revenues, JP Morgan cautions.
JP Morgan has downgraded five financial services stocks while upgrading two stocks over the weekend. Of these, only one downgrade is listed on the Singapore Exchange. Oversea-Chinese Banking Corp’s share price has run up, and hence warrants a downgrade according to JP Morgan. The US bank has also lowered its price target for DBS Group Holdings and but has raised it for SGX.
Clearly, DBS, OCBC and Singapore Exchange are trading at new all-time highs. JP Morgan points out that these three stocks are trading close to their 10-year high price- to-earnings ratios as well. “Singapore has a relatively better ability to manage the energy impact and wealth management should continue to benefit from flows. Yet, Singapore loans are just 44%-50% of total loans with credit risk spread across the globe, more so in the Gulf Corporation Counties and Asean. This poses asset quality risks,” JP Morgan warns.
