Analysts are bullish on growth amidst Fed interest hikes

They are now expecting four Fed hikes in 2018 after recent policy comments made by the central bank.

According to OCBC Investment Research, most economists are now expecting four Fed hikes in 2018 after US Federal Reserve Chairman Jerome Powell’s latest policy comments. Based on the latest International Monetary Fund’s projection for January 2018, forecast for global growth is estimated at 3.7% in 2017, with the momentum continuing into 2018 at 3.9% and 2019 at 3.9% as well.

“We believe this will be a positive setting for Singapore’s banking sector,” OCBC Investment Research Carmen Lee said.

This positive sentiment can also be seen in DBS, which has previously predicted for loans growth of 7-8% and for margin improvement due to a more favorable interest rate environment for banks. It is expecting to maintain its cost-income ratio at 43%. Dividend payout will go up to $1.20 in 2018.

DBS recently posted a good set of 2017 results, led by several business units including wealth management and higher product sales. Management is also upbeat about the outlook for 2018. As a recap, we believe that the current renewed interest in the Singapore residential property market should also be positive for its mortgage business.

Singapore’s overall loans are also picking up pace after growing from a measly 1% in 2016 to 8% in 2017 as it tries to catch up to close regional competitor Hong Kong's strong credit flows, according to a report from investment banking firm Jefferies.

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