SG bank shares fall amidst China crackdown on capital outflows

Maybank sees the recent weakness as an accumulation opportunity.

Singapore bank shares fell over the past week amidst concerns that expanded Chinese outbound investment regulations covering individual investors could weigh on North Asia wealth flows, according to Maybank.

DBS Group Holdings fell 4.6%, Oversea-Chinese Banking Corporation dropped 5.0%, whilst United Overseas Bank declined 2.3%.

Whilst Singapore lenders have increased their exposure to North Asia wealth over recent years, the majority of assets under management still originate from Singapore and Southeast Asia, limiting overall exposure.

“Sector fundamentals of strong execution, asset quality, & regional growth remains solid,” the report noted. “We see weakness as an opportunity to accumulate.”

In 2025, North Asia accounted for approximately 22% of pre-tax profit for DBS, 18% for OCBC, and 7% for UOB (adjusted for one-off provisions).

The report noted that China’s expanded rules appear aimed primarily at curbing unregulated capital outflows and channeling wealth through approved and compliant mechanisms, rather than broadly restricting offshore diversification.

The measures are also viewed as potentially supportive of China’s longer-term goal of internationalising the renminbi. In this context, some analysts suggest that licensed institutions in Hong Kong could benefit as capital flows shift from informal channels into regulated banking structures.

The report said that direct impact on Singapore lenders may be limited.

“The rules are aimed mainly at Chinese residents living in mainland China,” it noted. “This is not a segment SG banks are licensed to serve.”

Instead, the focus for Singapore banks remains on offshore Chinese wealth, including clients with assets, businesses, or family offices located outside mainland China, particularly in Hong Kong and Singapore.

“These new rules are more an extension of existing controls, rather than a completely new restriction on a major client segment for SG banks,” Maybank said. “The sector may even benefit at the margins if clients diversify their booking centres away from HK.”

It reiterated that the sector outlook remains supported by stable asset quality, resilient fee income, stabilising net interest margins, and continued regional credit demand.

The recent share price weakness is viewed by some as a potential accumulation opportunity, with OCBC highlighted for ongoing restructuring synergies under its “One OCBC” strategy and increased focus on Southeast Asia, while DBS is noted for its capital return visibility and scale advantages.