Citi Research analyst Tan Yong Hong believes there could be downside risks to Singapore banks’ net interest margins (NIMs) due to plummeting rates on the Singapore Overnight Rate Average (SORA) and the market pricing in more rate cuts from the US.
“Despite stable US rates, SORA has been pressured lower on [the] Monetary Authority of Singapore’s (MAS) incompletely sterilised foreign exchange (forex) interventions and flush banking system liquidity,” Tan writes in a report dated March 11 (US Eastern time).
In his view, this could continue as long as there is scope to lower the Singapore dollar nominal effective exchange rate (S$NEER) within the band. On Jan 24, the MAS said it would reduce the slope of its S$NEER policy band “slightly”, marking the first easing conducted by the central bank since March 2020.
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