Imminent Rate Cut: Is It Time to Sell Singapore Banks? (on The Smart Investor)

It is widely expected that The Federal Reserve will lower interest rates at its upcoming meeting on 17-18 September.

What does that mean for investors?

For one, the interest rate for some of the common instruments for fixed income has already dropped in anticipation of the rate cut.

For example, the cut-off yield of the latest 6-month T-bills auctioned on August 29 has dropped to 3.13% per annum. Additionally, the average return for the upcoming October Singapore Savings Bonds is only 2.77%, compared to 3.06% in the September issue.

How might this affect Singapore equities?

While most businesses will be impacted by interest rates, two sectors that are particularly sensitive are Singapore Banks and S-REITs.

In recent weeks, S-REITs have made noticeable gain over the past month. Interestingly, the three Singapore banks have shown resilience.

While I cheer the recent price gains, my primary objective in investing in banks and REITs is for the recurring annual dividends. Therefore, it’s crucial to consider how lower interest rates may affect their businesses and dividend payouts.

For a more detailed analysis, please refer to my latest article on The Smart Investor.

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