OCBC sees strong trade flows between Greater China and Asean despite tariff uncertainties
SINGAPORE - OCBC Bank on May 16 said it continues to see strong Greater China-Asean trade flows despite economic headwinds posed by ongoing US tariffs.
'If you look at Asean and Greater China as a whole, we continue to see flows between Greater China and Asean,' group chief executive Helen Wong said at a media briefing in Hong Kong on May 16.
'If China has a trade discussion with the West, it's not surprising that it is dealing more with (other parts of) Asia,' she said.
The US and China on May 12 agreed to drastically slash tariffs on each other's goods for an initial 90-day period.
Ms Wong said the bank saw many companies, including those in China, going to Asean.
There are opportunities in certain sectors such as shipping for infrastructure builds, with Singapore building Changi Airport's fifth terminal and Marina Bay Sands' expansion project.
In Johor, there are also opportunities to use some of the land for data centres as the world continues to go deeper into artificial intelligence, cloud computing and quantum computing, she said.
Whether she is positive about OCBC's performance, she said she is 'cautiously maintaining a stable view, in a way we need to prepare for a worse time'.
For the first quarter, OCBC Hong Kong said that collaboration revenue with Asean surged 17 per cent year on year.
Revenue for Hong Kong and Macau grew 14 per cent in the quarter from a year earlier to HK$1.9 billion ($315 million).
This is higher than the 11 per cent revenue growth logged in 2024 as compared to 2023, the bank said.
Moving ahead, OCBC aims to continue capturing Greater China-Asean growth opportunities by boosting trade and investment in the two regions and strengthening core competencies through digitalisation and liquidity management.
The bank will also tap growth from new economy and high growth sectors and step up support for corporate and commercial clients as well as financial institutions in Macau.
To attract small and medium-sized enterprises, OCBC has worked towards allowing them to open business accounts as soon as within a working day and offering support from industry specialists for onboarding and product education.
The number of premier banking customers in Hong Kong and Macau was up 30 per cent year on year in the first quarter while those in Mainland China jumped 60 per cent year on year.
Mr Wang Ke, head of Greater China and CEO of OCBC Hong Kong, said that one key success factor for the wealth business is to offer a complete wealth solution to meet a variety of customer needs.
'In first quarter of this year, given the equity market was doing very well in Hong Kong, we see our customers are more interested in equity-linked product as well investment-oriented insurance products,' he said.
But after US President Donald Trump announced reciprocal tariffs on April 2, he saw that the 'very agile' Hong Kong customers have moved quickly into bond and insurance products.
Bank of Singapore (BOS), the private-banking arm of OCBC, logged a strong performance in Hong Kong in the quarter as well, with assets under management (AUM) growing 20 per cent year on year, putting it on track to meet its goal to grow AUM in Hong Kong by 50 per cent by 2026.
Revenue grew 25 per cent year on year, led by a 36 per cent growth in transaction revenue. Wealth planning revenue saw close to four times growth.
BOS' Hong Kong branch said it will prioritise expanding the ultra-high net worth client segment and grow the financial intermediaries (FIM) business.
In the first quarter, AUM for its ultra-high net worth client segment in Hong Kong grew 54 per cent year on year.
'We have created a new unit to spearhead and formulate strategies for the ultra high net worth segment, and we continue to identify and deliver exclusive and unique investment opportunities to our clients, and we have also actively engaged the next generation of these clients,' said Mr Rickie Chan, chief executive and head of private banking of Greater China at Bank of Singapore's Hong Kong branch.
For example, in 2024, BOS partnered Tsinghua University School of Economics and Management in Beijing and Singapore Management University in Singapore to create a programme to prepare participants in wealth preservation and legacy management, focusing on governance, private equity, family office strategies among others.
To grow its FIM segment, the bank also launched a digital platform with fintech firm iCapital to expand financial intermediaries access to alternative investments and insights.
Mr Chan said times of volatility and uncertainty present opportunities for the bank to step up.
'It's exactly the time that when they are confused, when they are uncertain, where we can come in and add a lot of value. The past three, four months have been difficult for the investment sentiment, yet we were able to deliver quite good results,' he said.
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'MTI has confirmed this understanding with the Office of the US Trade Representative,' a ministry spokesperson said, referringn to the US' Executive Order released on Jul 31 (eastern time). 'We are closely monitoring developments and will seek clarification from our US counterparts as necessary,' the spokesperson added. The relatively low baseline tariff rate of 10 per cent should bring some relief to exporters in Singapore, economists said. 'Singapore is in a sweet spot and 'can live with it', as her reciprocal tariff is the lowest in Asia,' said Dr Chua, echoing similar remarks by the Republic's Prime Minister Lawrence Wong earlier this week. But companies looking to launch investments are likely still 'in a holding pattern' as they assess the frequent changes in tariff policies, said Denise Cheok, head of South-east Asia economics at Moody's Analytics. Trump's tariff letters state that the levies may change 'depending on our relationship with your country', noted Bernard Aw, the Asia-Pacific chief economist at credit insurer Coface. 'The certainty is that uncertainty will remain,' he said. With the fluid situation, he said companies likely have two plans ongoing – a short-term one to mitigate uncertainties, and a long-term plan to adjust to the new economic realities. The long-term one would entail reorganising logistics and shifting production, among other things. Even so, MNCs already in the city-state would likely maintain their presence, said Dr Chua. MNCs caught in a higher-tariff country may consider Singapore as a part of their supply chain. Still, Cheok estimates the baseline tariff could shave about 0.5 percentage points off Singapore's gross domestic product. 'With close trade partners attracting much higher tariffs, the hit to GDP from direct tariff-related disruptions would come in closer to about 1 percentage point,' she said. She added that beyond the headline 10 per cent, a key concern for Singapore is sectoral tariffs, especially on pharmaceuticals, which dominate Singapore's exports to the US. Since the Singapore economy is highly dependent on trade, the indirect effects of tariffs on global export demand remain a key factor to the outlook, said Cheok. Dr Chua said he expects Singapore's export and GDP growth to slow in H2, but not contract, given the reciprocal tariff deals, the low baseline tariff and a likely extension of the US-China trade truce. Reported by Sharon See from Singapore Vietnam: First, but not best While Vietnam was the first Asean country to strike a trade deal with the US by granting 'total access' to its market, its tariff outcome is no more favourable than that of most regional peers. Washington set a 20 per cent levy on goods imported from the South-east Asian country, with which the US ran a trade deficit of US$123.5 billion last year – the highest in Asean and third-highest globally. While this was a significant reduction from the previously announced 46 per cent, it remains slightly higher than the 19 per cent imposed on Malaysia, Indonesia, Thailand, Cambodia and the Philippines. According to S&P Global's latest purchasing managers' survey released on Aug 1, new export orders for Vietnam's manufactured goods contracted for the ninth consecutive month in July. While manufacturers remained optimistic about output growth over the coming year, sentiment fell to a three-month low – well below the series average – because of concerns over how the US tariffs weighed on the outlook. Still, the manufacturing sector returned to expansion in July after three months of decline, with firms securing enough domestic business to lift total new orders back into growth. Maybank analysts wrote in a recent note that Vietnam's steady rollout of private-sector reforms would cushion the impact of of the tariffs on external trade by promoting domestic investment and boosting the country's competitiveness as a destination for foreign direct investment. An improved business environment – characterised by reduced red tape, a more predictable legal framework, better education system and stronger local firms – is expected to broaden Vietnam's value proposition beyond being merely a low-cost destination, they added. Reported by Jamille Tran from Ho Chi Minh City Malaysia: Levelled playing field Just before the Aug 1 deadline kicked in, the US reduced the reciprocal tariff imposed on Malaysian imports to 19 per cent, down from the earlier 25 per cent rate, bringing the South-east Asian country in line with its regional peers. It also removes a key overhang for exporters, particularly in the electrical and electronics, as well as glove sectors. Hong Leong Investment Bank wrote in a note that from a trade standpoint, the harmonised US tariff rates across Asean ensure that Malaysia is not at a relative disadvantage. Ken Low, head of dealing at Moomoo Malaysia, noted that the tariff reduction offers short-term optimism. While the new rate is less damaging than the previous one, it remains on par with that of its regional peers, and continues to pose a hurdle to the competitiveness of Malaysian exports. In a statement on Friday, Malaysia's Ministry of Investment, Trade and Industry (Miti) stressed that the US-Malaysia tariff agreement was reached without compromising on key 'red-line' issues such as excise duty and Bumiputera equity quotas, thus protecting the country's sovereign economic policies. At a media briefing on Friday evening, Miti Minister Tengku Aziz said Malaysian semiconductor and pharmaceutical exports would remain exempt from US tariffs. Under the deal, the Malaysian government confirmed that 61 per cent or 6,911 items of its new trade arrangement's tariff lines with the United States would have zero tariffs. Malaysia and the US are expected to issue a joint statement on the tariff agreement over the weekend. Tengku Zafrul clarified there is no agreement or request from the US for exclusive access to Malaysia's rare earths, despite such minerals being central to US trade talks globally. To address the trade deficit with the US, Malaysia will make major procurements, including the purchase of another 30 Boeing aircraft valued at US$9.5 billion, he said. Miti said the government worked with Bank Negara Malaysia to model tariff scenarios and would implement targeted measures to support affected exporters and small and medium-sized enterprises. Reported by Tan Ai Leng from Kuala Lumpur Indonesia: Room to breathe Indonesia, which is grappling with domestic economic pressures , has secured a final US tariff rate of 19 per cent on its exports, easing fears of the fallout from President Trump's Apr 2 rate of 32 per cent. While still nearly double the 10 per cent baseline applied during the reprieve, the revised rate offers some relief as the country grapples with domestic economic pressures. Indonesia's tariff rate remains lower than Vietnam's, a key regional rival in labour-intensive sectors like textiles and footwear. As the US ranks as Indonesia's second-largest export market, analysts believe the reduced tariffs could boost trade and protect labour-intensive industries from economic challenges. The deal was reached following an agreement between President Prabowo Subianto and Trump to open Indonesia's vast market of 280 million consumers to US goods. Indonesia, which runs a US$17 billion trade surplus with the US, will eliminate tariff barriers on more than 99 per cent of goods coming in from the US, and commit to purchasing US$2.5 billion in agricultural products and US$15 billion in energy supplies. Citi's research team sees the agreement as having a net dovish impact on the Indonesian economy. While the shift in import sources may slightly weigh on the trade balance, the broader macroeconomic effects are expected to be manageable. Risks to the rupiah remain, but are likely to stay contained as long as Indonesia's commodity export prices remain stable. Reported by Elisa Valenta from Jakarta Cambodia: Double cuts to match peers Cambodia cheered the 'great news' of a 19-per-cent tariff on its US exports – a cut from the earlier 36 per cent and a significant drop from the original 49 per cent, which would have devastated its manufacturing sector and jarred its economy. The kingdom's Prime Minister Hun Manet took to Facebook on Friday morning to praise the 'excellent outcome', but analysts BT spoke with cautioned that Cambodia is not yet out of the woods. Adam Ahmad Samdin, an economist at research firm Oxford Economics, said that transshipments, the definition of which is left to the discretion of the US authorities, remain a bugbear for Cambodia, because its production is heavily reliant on Chinese inputs. The nation's post-pandemic economic expansion has been picking up speed, and annual growth has surpassed 5 per cent, but the double whammy of US tariffs and recent border disputes with neighbouring Thailand has clouded its outlook. Adam acknowledged that the reduced levy mitigates a substantial amount of downside risk to Cambodia's growth, noting that there remains scope for more immediate near-term support, as the kingdom improves its public debt ratio and rebuilds its fiscal space. Maybank economist Brian Lee added that border tensions will weigh on tourism, particularly in border areas, such as Poipet. Thailand is Cambodia's top source of international tourists. Nevertheless, the revised tariff brings Cambodia in line with its Asean neighbours and is lower than the rate imposed on its regional competitors (such as India) in the garment space, said Lee. He added that the risk of a sharp pullback in foreign direct investment is now reduced. The house expects Cambodia's growth to slow from 6 per cent in 2024 to 5 per cent this year and 4.6 per cent next year. Reported by Goh Ruoxue from Singapore
