Singapore banks' shares may be near the end of their rally as their first-quarter results represent a short-term top and business activity is expected to cool off in the coming quarters, said Macquarie Equities Research.
"We believe the rally in Singapore bank stocks is looking tired and we would look to pare down holdings at current levels," Macquarie said in a report.
"We believe that upcoming quarters may look weaker for all, given slowing business activity (we assume) lack of major investment banking deals vs 1Q13," Macquarie said, adding that the sector as whole is trading close to fair value, and lacks operational catalysts to the upside.
It downgraded DBS Group Holdings Ltd and UOB Ltd to "neutral" from "outperform", and cut its rating on Oversea-Chinese Banking Corp Ltd to "underperform" from "neutral".
Banking shares have outperformed so far this year, with DBS rising 17 percent, OCBC up 15 percent and UOB gaining 11 percent. Singapore's benchmark Straits Times Index has gained 9 percent. Singapore's leading banks beat market forecasts with their earnings.