Singapore banks' system loan growth dips to 9.6% in June

What could be the reasons behind it?

According to Barclays, system loan growth in June slowed to 0.4% m/m (9.6% ytd June) and 0.2% m/m on a constant currency basis, taking into account the mild USD appreciation against the SGD in June. 

In particular, general commerce (trade finance) and manufacturing loans softened to 1.4% and 0.3% m/m in June vs 23% and 19% ytd-June.

Here's more from Barclays:

We believe the slowdown in June is partly related to 1) China’s liquidity tightness and as regulators clamped down on RMB/USD currency arbitrage trade lending and 2) concerns over potential liquidity outflows from the ASEAN region in anticipation of US Fed tapering. Relative to the Hong Kong banks where Mainland Chinese bank’s subsidiaries are very active, the Singapore banks are more conservative on China-related trade finance business, in our view.

Housing loan growth was steady at 0.8% m/m and 5.2% ytd. In late June, the MAS fine tuned rules on housing loan-to-value limits to prevent circumvention of tighter LTV limit on second and subsequent housing loans and introduced a 60% Total Debt Servicing Ratio (TDSR) cap, to further strengthen credit underwriting standards.

The loans to deposits ratio was stable at 100% with loans and deposits growth 0.3-0.4% m/m. Despite the elevated tightness in system liquidity relative to history, we believe Singapore is still one of the most resilient markets in EM Asia to liquidity outflows.