To The Moon

Systemic risk is elevated but below the levels seen during past crises as Russia is not well integrated into the global financial system. Singapore banks’ exposures to Europe and Russia are minimal. The Fed is expected to kick-start the interest rate upcycle with a hike of 25bp next week.

Russia is not well integrated into the global financial system. Financial linkages with other countries have been reduced since the European Union first imposed sanctions after Russia annexed Crimea and Sevastopol in 2014. Foreign central banks have not tapped on swap lines and repo facilities established by the Fed, indicating most countries didn’t experience dislocation in their financial systems.

Using the past three crises (Europe's Sovereign Debt Crisis, Crash in Oil & Gas and COVID-19 pandemic) as a gauge, the potential downside is 30-42% for DBS, 1-13% for OCBC($O39.SI). Direction for share prices of banks depends on the progress of peace talks to end the Russia-Ukraine war. We see opportunities for bargain hunting in current weakness. We see strong support for OCBC at S$11.00.