Asean supply-chain shifts: Can Singapore banks be the real winners?

SINGAPORE banks are best placed to benefit from supply chain shifts into South-east Asia, based on their cutting-edge technology, regional footprint, and access to US dollar (USD) deposits.

Multinational corporations, as well as large medium-sized Chinese businesses, could readily turn to the Republic's lenders as they move their operations out of China in the coming years, analysts from Maybank Kim Eng have suggested in a report.

Calling Singapore players' technology "state of the art", they estimated that DBS Bank investments in technology will grow at a compound annual rate of 8 per cent to some S$1.3 billion in 2021, while United Overseas Bank's spending is tipped to rise by 15 per cent yearly.

"These investments are bringing with (them) innovative and sophisticated product solutions," the analysts wrote, citing offerings such as a DBS cross-border blockchain trade platform that can be tapped by farmers, shippers and banks to manage commodities at the click of a mouse.

"For relocating supply chains, these solutions may provide competitive advantages as well as improve the ease of changing geographies," said the analysts, who expect the movement of supply chains to drive Asean's larger share of UOB loan growth.

Drawn by improving infrastructure, cheaper labour and investment-friendly government policies, Chinese supply chains have been moving into Asean in the past few years.

But, on the back of trade tensions between the United States and China, as well as political unrest in the offshore financial hub of Hong Kong, Maybank Kim Eng's research has pointed to a pick-up in the shift - especially to Vietnam, Thailand, Malaysia and Indonesia.

The report added that the big companies that are on the move "will value high-quality balance sheets (and) access to USD funding, as well as product sophistication and breadth of coverage, as they expand their businesses in the region", in their search for banking partners.