OCBC share price in new dawn

What a way for OCBC share to start the year. On 8 January 2021, OCBC stunned investors by announcing the retirement of former CEO Samuel Tsien. Prior to this, there was no hint of succession planning for the CEO position. Nonetheless, the market cheered the news and sent OCBC share price surging 7%, rising from $10.10 to a high of $10.80 on 8 January 2021. Will the new CEO, Ms Helen Wong, ignited sparks for OCBC share price?

Hands on heart, I have nothing against Samuel Tsien. In fact, I quite like him. Over the past decade, OCBC has emerged as the number two bank in Singapore, much thanks to the acquisitions of Hong Kong’s Wing Hang Bank, Barclays Wealth and Investment businesses in Singapore and Australia and National Australia’s Wealth and Investment businesses in Singapore and Australia. These mergers and acquisitions led to rising OCBC share price during Samuel Tsien’s tenure.

OCBC share price

Although Samuel Tsien’s tenure in OCBC had been defined by successful merger and acquisitions, the final lap of his helm saw OCBC share price losing form due to the 2019’s US-China trade war and the 2020’s COVID-19 pandemic. Admittedly, I had lost patience with this counter. My entry for OCBC share price was $11.00 per share in late 2019. By December 2020, I had decided to divest all my OCBC shares after dollar averaging at $9.95. Overall, I sustained $100 losses (after offsetting total dividends collected) in OCBC but reinvested the proceeds in Wilmar, which generated $1,480 of profit.

Do I have regrets investing in OCBC? To be frank, hindsight is always hundred percent. Nobody in his right mind could have predicted COVID-19 in December 2019 (that was when I decided to invest in OCBC share). When it comes to investing, there is no place for sentiments. What is more important is making sure that our stock investments are profitable. After all, our ultimate aim in investing is to make money. Given the sluggish performance of OCBC share price in 2020, I stood to suffer opportunity cost if I had not cut losses and reinvest the proceeds in other counters.

The sluggish performance of OCBC share price is glaring. Among the three banks, OCBC share is trading at Price/Book Value of 0.95 while DBS is trading at Price/Book Value of 1.2 and UOB is trading at 0.98. It appears to me that there is a valuation gap for OCBC share price but whether this counter will return to form in 2021 is dependent on several factors. In this article, I will share my analysis and highlight the key culprit for the soft performance of OCBC share price.

Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. At this moment, I am not in OCBC. Whether OCBC share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.

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OCBC share price held ransom by Great Eastern

OCBC share price ambushed by MAS

OCBC share price in lost world

At the age of 66, it is true that Samuel Tsien has reached retirement age. On this note, no one will dispute that OCBC needs a younger CEO who can provide fresh perspectives and energy. But what is curious for many investors is the timing of the change. Samuel Tsien is considered popular among investors because during his tenure, one of his successful strategies in ensuring the robust form of OCBC share price was shares buybacks.

In comparison to DBS and UOB, OCBC is considered the most aggressive when it comes to share buybacks in recent years. The series of share buybacks in March and April 2020 enabled OCBC share price to make a swift recovery from the low of $7.80, the peak of the COVID-19 impact on global stock markets. However, the restriction of shares buybacks imposed by MAS on the three banks means that OCBC could not rely on this strategy to revitalize the bank stock price.

It appears to me that the new CEO will [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Updated: February 16, 2021 — 9:51 am

4 Comments

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  1. Hi Gerald,
    Insurance is a good business overall. Don’t understand why GE hasn’t been doing well for quite some time. What do you think are the actual reasons affecting its performance, besides its likely poor investment returns? Too small the SG market?

    Another question is why OCBC grab so many shares of GE, thereby making GE share trading inactive while maintaining its listing? Thanks.

  2. Hi Leo,

    Thank you for your comments and you have asked very good questions! You are right that insurance is a good businesss and Great Eastern used to be OCBC champion asset. However, I do believe that the exemption of foreign ownership of insurer in Malaysia came at a high price for GE, which had to contribute US$490 million to the B40 fund. I believe the contribution would be spread out over several years, henceforth weighing on GE’s performance.

    Regarding as to why OCBC grab so many shares of GE, I think ideally OCBC would want to make GE a 100% subsidiary but this could contravene MAS policy which forbids banks to own non-core assets.

    Regards,
    Gerald
    https://sgwealthbuilder.com

  3. Thanks, Gerald, for your quick reply. Just found this piece of information, where the 2 billion seed funding should be the US$490 million you mentioned in your reply –

    The Budget 2019 indicates that the B40 Fund will receive initial seed funding from Great Eastern Life Assurance (Malaysia) Berhad in the amount of RM2 billion (Seed Funding). Great Eastern Holdings Limited has indicated that the Seed Funding was a means to satisfy a sell-down requirement imposed on wholly foreign-owned insurance companies and is also consistent with its corporate social responsibility efforts. Specific details with respect to the Seed Funding are still being finalised.

    M government is transferring part of its own responsibility to foreign insurance companies. Too bad for GE to pay this additional price to buy a ticket to this market or an exemption to a new policy.

  4. Hi Leo,

    Thanks for your comment. Yup, you are right. But I must stress that OCBC is not just all about GE. Samuel Tsien has beefed up the wealth management segment and acquired Wing Hang. These three assets will be valuable for OCBC in the long term.

    Regards,
    Gerald
    https://sgwealthbuilder.com

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