According to UOB Kay Hian (UOBKH) in a Jan 17 update, the trend of elevated government bond yields is expected to persist. Firmer interest rates are positive for banks. Additionally, inflows of foreign direct investments (FDI) into Asean are good for the banks with an Asean footprint. According to UOB Global Economics & Markets Research, FDI inflow into Asean countries is projected to expand at a CAGR of 8.3% to reach US$356 billion ($486 billion) in 2030.
As a proxy to Singapore, Asean and the wider Asia-Pacific region, banks are viewed as a core part of most equity portfolios. We had a challenge deciding which bank to land on as one of our top 12 picks for 2025. The three local banks rose to new highs in January.
Since we can only choose one bank for our 2025 top 12 picks, we landed on United Overseas Bank (SGX:U11
) (UOB) because of Malaysia and China. Among the local banks, UOB is viewed as the largest foreign bank in Malaysia. It also has the smallest absolute exposure to greater China, including mainland China. Although we prefer to be contrarian, we are going with the trend this year. Based on a Bloomberg poll, analysts seem to like UOB more than DBS Group Holdings and Oversea-Chinese Banking Corporation (OCBC). In terms of valuations, though, OCBC has the lowest valuations, and DBS has the richest.
