DBS Group Holdings faces Asia Financial Crisis 2022?

Lifetime Membership The power tailwind may turn out to be a deadly headwind. Many analysts, including myself, had believed that the ongoing US Federal Reserve interest rate hikes will turbocharge Singapore bank stocks like DBS Group Holdings share price to high heavens. Yet that fantasy has not materialized despite the fact that US Federal Reserves had raised interest rate by 75 basis points (50 basis points on 7 May and 25 basis points on 17 March). Year-to-date, DBS Group Holdings share price had tumbled 8% instead. What the hell has happened to the leading light of SGX?

DBS Group Holdings share price

A concerned SG Wealth Builder Lifetime member has written in to enquire about the bizarre performance of Singapore bank stocks against the backdrop of rising interest rates. To be fair, US bank stocks like Bank of America and JP Morgan have performed worse in comparison to their Singapore counterparts, falling by an average of 25% year-to-date.

The prevalent thinking is that the surging inflation, coupled with the rising interest rates, could tip global economy into a recession. It also doesn’t help that the ongoing Ukraine-Russia conflict worsens the global supply-chain disruption brought forth by the pandemic. All these uncertainties create fear in the market. Although the contrarian would argue that one should invest when there is much fear in the market, investors should not throw caution to the wind. In my view, a storm may be brewing over in Asia. One that may wretch havoc to Singapore bank stocks like DBS Group Holdings share price.

Source: Bullionstar

Currently, Japanese yen is nearing a 24-year low against the greenback. The Japanese yen has been falling since early 2021 but the steepest fall occurred on 6 March 2022, a weak after the start of the Ukraine-Russia conflict. In the forex market, USD/JPY is one of the four major currency pairs. Due to the increasing US interest rates, traders are betting on the dollar and shorting the Japanese yen. This causes the yen to fall. To add fuel to fire, the Bank of Japan has opted not to tighten monetary policy in Japan and intends to maintain its loose monetary policy for the time being.

Incidentally, DBS Group Holdings share price went into correction mode in the week of 6 March 2022, falling to a low of $31.20 on 8 March from a high of $36.50 on 23 February. The counter rebounded following the US Federal Reserves rate hike on 17 March but turned lost form subsequently when the Japanese began its steep decline in April 2022.

The free-falling Japanese yen brings back painful memories of the Asia Financial Crisis of 1997. Back then, Thai baht collapsed following purportedly short-selling attacks by hedge funds. Consequently, the Thai government free-float the baht as it run out of foreign reserves to support the USD-Baht currency peg. The crisis spread like wild-fire throughout Southeast Asia, with Indonesia, South Korea and Malaysia also affected. Although Singapore was less affected, the regional economic downturn led to a recession in the city-state.

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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. Furthermore, I am not vested and have never invested in DBS Group Holdings share before. Whether DBS Group Holdings 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.

DBS Group Holdings share price in double whammy

Apart from macro-economic uncertainty, DBS Group Holdings share price faces another unexpected headwind domestically. It seems that the narrative has changed as Monetary Authority of Singapore (MAS) [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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