Swiss billionaire investor Felix Zulauf today (Feb 11) warned that major Singapore banks are facing capital outflows and will face a banking crisis as a result from being over-reliant on China.
Felix said China corporations will cut their imports and more indebted China companies will default:
“I expect the situation the deteriorate to a point where we will witness a banking crisis in Asia that will hit Singapore and Hong Kong particularly hard. It is conceivable that Singapore, which has attracted a lot of foreign capital over the years because of its image as a strong-currency state, will be extremely exposed to the situation in China. Singapore’s banking-sector loans have grown dramatically in the past five or six years. Singapore is now losing capital, which means the banking industry is losing deposits.
I mentioned the potential for a banking crisis in Singapore. I don’t recommend shorting Singapore bank stocks, but rather the EWS, or iShares MSCI Singapore ETF. In this case, an investor will benefit from both declining local stock prices and a decline in the Singapore dollar against the U.S. dollar.”
Since the start of 2016, Singapore’s DBS stocks is currently trading below at -17.8%, OCBC -12.5% and UOB -8.01%. The three major banks have non-performing loans, or bad debts, as high as 0.9% for DBS and OCBC, and 1.3% for UOB.
Singapore is currently having a credit bubble with most capital stuck in property. The recent increase in interest rate have placed much stress on mortgages resulting in a higher default rate. The Singapore government have been largely silent on the recession the state is going through, and rumors are currently spreading that the government is dipping its hands into the national reserves to prop up the Singapore Dollar.