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Slight Oil Price Recovery, Local Covered Bonds See Strong Demand
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By: Joey Ho
Articles (30) Profile

As stargazers marvelled at the recent solar eclipse, investors saw an exciting week in the stock market.

The Dow Jones Industrial Average recovered above the 17,000 mark, last seen two months ago, while the S&P 500 hit the 2,000 levels before making a slight retreat. Wall Street stocks were lifted by a slight recovery in crude oil prices which soared close to five percent to US$38.29 as strong demand resulted in a large drawdown to gasoline inventories. However, the ultimate fate of crude oil prices is still largely dependent on potential production freeze agreements between Organization of the Petroleum Exporting Countries (OPEC) producers and non-OPEC producers.

In China, exports fell 25.4 percent in February, the largest drop since 2009. While the disappointing result has been attributed to lower business activities due to the Lunar New Year holidays early last month, the decline was almost twice as much as market expectations. In a separate release, China’s top economic planner said that the country’s economy will not experience a hard landing adding that the country will work to improve the efficiency of government spending. The statement comes after the world’s second largest economy lowered its economic growth target for 2016 to at least 6.5 percent.

In Singapore, local banks experienced strong demand for covered bonds as investors shift to safe haven products, reflecting the weak confidence in equity markets. United Overseas Bank‘s first issue of its covered bonds was 2.6 times oversubscribed. The EURO500 million bonds bear an annual coupon of just 0.25 percent per annum. In comparison, DBS Bank issued the lion city’s first covered bonds last year. The US$1 billion bonds bear a semi-annual coupon of 1.625 percent per annum. Demand for covered bonds is expected to remain strong especially as market volatility continues. Local banks are expected to benefit from the new source of funding even in difficult times.

Equipped with a bachelor in banking and finance, Joey covers the finance, technology and healthcare industry in Singapore.

Please click here for more information about this author.

DBS Group Hldgs  25.150 +0.15 +0.60%   
Business: [FY18 Total Income] Institutional banking (43.7%), consumer banking/wealth management (42.9%), treasury markets and others (13.4%).

Insight: Apr-19, 1Q19 net profit rose 9% to a record $1.7b.... Read More
United Overseas Bank  25.760 +0.06 +0.23%   
Business: [FY18 Turnover] Group retail (43.3%), group wholesale (43.2%), global markets & investment management (5.1%), others (8.4%).

Insight: May-19, 1Q19 total income rose 7.8% to $2.4b due t... Read More

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