Farewell, cheap money – you will be missed. Few places have enjoyed the flood of easy dollars, courtesy of the Federal Reserve, as much as Singapore and Hong Kong. So OCBC, Singapore’s second-biggest lender, entering exclusivity talks to take over Hong Kong’s Wing Hang looks like a case of two banks, stranded by a receding tide, clinging together.
The situation is not so desperate or poetic, although one reason OCBC would buy a lender ranked 12th in its home market is that more deposits provide a buffer against the rising cost of money. Wing Hang has a good retail business in China’s Pearl River Delta and Macau – another appeal for OCBC, whose big Malaysian business is a drag on growth. Trading at a flashy 1.7 times book, against a pedestrian return on equity of less than 10 per cent, Wing Hang is no bargain, unless compared with the eye-popping 3.5 times book that DBS, OCBC’s home rival, paid for Dao Heng a decade ago.
Should the deal go through, Fed tapering will remain a worry. Hong Kong and Singapore are the big Asian markets most closely linked to US monetary policy through their dollar-pegged currencies.