First-timer's bad luck: SGD deposits shrivelled for the first time in 11 years

Holding cash is just unfavored by many.

Analysts must be having the shock of their lives as industry SGD deposits showed weakness after a robust 11 years as the interest rates discourage being drawn to holding cash.

According to Maybank Kim Eng, the industry SGD deposits shrank by 0.7% YoY in May, its first contraction since Mar 2003.

Here's more from Maybank Kim Eng:

The current depressed interest rates make holding cash unappealing. Although the SGD loan-to-deposit ratio (LDR) has been inching up, we are still comfortable with May’s figure of 86.9%.

With deposit growth expected to remain lethargic, SGD LDR looks set to rise further in 2014.

We expect industry loan growth to slow to 9-10% in 2014-2015, with housing loans rising 4-6% in tandem with a slowing property market. However, we believe the shortfall would be compensated by a reasonably strong business loan growth of 12-14%. Lending to the general commerce sector could prove to be the wild card.

For exposure, DBS is our top sector pick as it is the best positioned to take advantage of a rising interest rate environment. We would stay cautious towards OCBC.

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