As Asia recovers from the pandemic, a conservative way to play the rebound is through high quality Hong Kong and Singapore banks. These banks offer you money center home bases as well tentacles reaching in to Mainland China as well as throughout booming Southeast Asia.
My 2 Favorite Asian Bank Stocks
One premier Asian bank stock to consider is what I refer to as the JPMorgan of Singapore: the Development Bank of Singapore (DBSDY) – better known as DBS Group Holdings.
DBS is one of the largest banks in Southeast Asia with a presence in 18 markets. It is headquartered in Singapore, with its main listing on the Singapore Stock Exchange, and is the largest constituent of the Singapore Straits Times Index. The Government of Singapore established DBS in July 1968 and its largest and controlling shareholder is Temasek Holdings, which is one of two large sovereign wealth funds controlled by the Government of Singapore.
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DBS has a growing presence in the three key Asian areas of growth, which it defines as Greater China, Southeast Asia, and South Asia, meaning India. It is the largest and strongest bank in Southeast Asia and the leading consumer bank in both Hong Kong and Singapore.
Its tentacles reach out through 200 branches in 50 cities. DBS produces steady profit margins, revenue, and earnings growth and is also increasing market share in consumer and corporate banking. Wealth management is also a strategic priority and a growing part of its business. Despite all of these strengths, DBS is trading at only 16 times trailing earnings and sports a solid 2.5% dividend yield.
When thinking about other Asian bank stocks, HSBC Holdings (HSBC) usually comes to mind. This is a bit of a turnaround story as it seeks to boost returns from its Mainland China business segments, which have lagged Hong Kong operations. On the plus side, the stock is only trading at 62% of break-up value.
The bank was founded in Hong Kong in 1865 and previously known as the Hong Kong & Shanghai Banking Corp.; it’s now based in London. HSBC garners about half of its revenue from Asia but, surprisingly, it has sold its Chinese strategic investments such as its stake in the Bank of Shanghai and the second-largest life insurance company in China, Ping An.
It has about 160 branches on the mainland, more than any other foreign bank.
Of the bank’s 226,000 employees, 27,000 are in China and 29,000 are in Hong Kong.
In an effort to turn things around in China, the bank is unleashing an army of 3,000 branchless bankers to search prosperous coastal cities for wealthy clients who need advice on insurance and investments. The venture, known as HSBC Pinnacle, is centered on the emerging trend of providing digital banking services, especially wealth management, to the country’s rising wealthy.
HSBC Holdings still carries weight in the region as a respected brand of quality.
This strategy is both low cost and flexible and should pay off in rising fee income over time.
My advice is to blend in some blue-chip Asian bank stocks like DBS and HSBC and watch your global portfolio grow.