Over 16 million UOB shares were shorted in March 2020
This is up from seven million share short sales in February on the counter of Singapore’s fifth largest listing.
With a market capitalisation of S$29.53 billion, United Overseas Bank (UOB) is the third most valuable bank in Singapore, and fifth overall among all public companies.
UOB’s share price has taken a huge beating since the coronavirus outbreak in late-January, descending as much as 34.5% during this period to a low selling price of under S$18 a share. UOB securities were trading over S$26 in January.
Stocks notably fell 8.1% in just one day on 23 March to a four-year low of S$17.28, following the US Senate’s failure to approve a US$2 trillion coronavirus fiscal response bill.
UOB’s share price has since recovered slightly. UOB equity contracts are trading at S$18.98 as at 11:33 SGT on 02 April, based on IG market data. This represents a 27% decline in share price in the first quarter of 2020.
UOB share short sell and buy-back volume jumped up in March
With equities on a downward price trend, short selling on the UOB counter hit a peak of 1.7 million shares on Thursday 19 March, or 23.2% of all transactions that day, as share price fell 5.14% to under S$19 a share – the lowest level seen since late-2016.
Over 16 million shares were shorted in March alone, as compared to only seven million in February.
Like DBS Group and OCBC Bank, UOB has also been buying back shares since 06 March, although it started its buy-back programme later than the former two money lenders. Since that date, UOB has purchased 993,000 shares from the market. No asset purchases have occurred since 25 March.
Comparatively, DBS and OCBC have bought back shares totalling 21.4 million and 4.52 million respectively.
Based on a Singapore Exchange circular posted on 20 March, UOB has a lot more room to manoeuvre where it concerns buy-backs. The bank is authorised to purchase a total of 83.29 million shares under its current board mandate.
Latest analyst predictions on UOB’s share price
Analysts from CIMB, DBS, Maybank and RHB previously gave the UOB stock an average 12-month price target of S$20.24 a share.
Maybank analysts gave the highest target of S$22.55 per share, stating that UOB has historically displayed lower non-performing loan growth volatility during banking down cycles, including the 2008 Global Financial Crisis.
They further noted that the group’s strong Common Equity Tier 1 ratio of 14.3% and high loan loss provision cover of 91% also places it in a solid position at the beginning of the coronavirus crisis.
‘The group’s regional integration efforts together with a low US dollar loan-to-deposit ratio (62%) should also give UOB an advantage in gaining market share from North-South supply chain moves’, they concluded.
DBS researchers have given the UOB stock a ‘hold’ rating, given the still-uncertain macroeconomic outlook and global recessionary pressures, as well as the recent interest rate cuts by various central banks that will only lower net interest margins.
However, RHB analyst Leng Seng Choon said UOB is his preferred pick for the Singapore banking sector because of its more conservative money lending strategy. As such, he believes UOB’s share price has the least downside risk among the three banks in the short term. He gave UOB a 12-month share price target of S$20 per share.
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