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The Week Ahead: DBS and UOB Could Lift The STI

David Kuo

The earnings season gets interesting next week with two Singapore banks stepping into the spotlight. They could give the Straits Times Index  (SGX: ^STI) a big boost.

In April, Singapore’s biggest bank, DBS Group (SGX: D05), beat market expectations with a 26% jump in first-quarter profits. The improvement was thanks to growth in loans, non-interest income and higher net interest margin. Net interest income jumped 16% because of higher loan volumes and a wider difference between the interest paid to savers and the interest that it charged borrowers.

United Overseas Bank (SGX: U11) is also pencilled in for results. In April, the bank posted record first-quarter profits. It said higher net interest margins, growth in wealth management income and a drop in bad debts contributed to the improvement.

It was a mixed bag Sembcorp Industries (SGX: U96) in the first quarter. In May, the industrial conglomerate said revenues jumped by almost a third. But earnings fell by almost the same proportion in the absence of a one-off gain from a year ago. The company believes that its India energy business should become profitable. But not until the end of the year.

UOL Group (SGX: U14) said in May that prices of private residential properties in Singapore were trending upwards. It also said that office rents could continue its upward momentum on steady demand and decreasing supply. That could bode well for when it reports second-quarter numbers. But all that was before the new cooling measures introduced by the government.

It will be interesting to see how a rising US dollar will impact Venture Corporation (SGX: V03), when it reports second-quarter earnings. In April, the electronics manufacturer said first-quarter margins would probably have been double-digit, if the US dollar had stayed neutral. The dollar is far from neutral right now.

Ascendas REIT (SGX: A17U) said in April that the Singapore industrial property market should recover gradually on the back of an improving economy and the tapering of new industrial property supply. In its fourth quarter, Ascendas posted a small rise in distribution per unit on a 3.3% improvement in gross revenues.

On the economic front, the Fed will announce its latest interest-rate decision. In June, it raised the federal fund rate by 0.25% to between 1.75% and 2%. It said the labour market had continued to strengthen and that economic activity had been rising at a solid rate. It is not expected to raise interest rates again until September.

The first estimate for economic growth in the Eurozone is expected to show that the world’s second-largest trading block expanded 2.5% in the second quarter. Meanwhile. Inflation is expected to dip slightly to 1.9%, while unemployment in June could have edged up from 8.4% to 8.5%.

China will report some key Purchasing Managers’ Indices for July. Both manufacturing and services activities are expected to have expanded, albeit at a slower pace than in June.

And finally, Singapore bank lending could have increased from S$667.9 billion in May to S$670 billion in June. Lending to the private sector is at an all-time high.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo owns shares in DBS and UOB.