Lifetime Membership From a low of $32.40, DBS Group Holdings share price shook off the blues of Black October to smash to a six-month high of $34.20. The return of DBS Group Holdings share price came on the back of a stellar 3rd quarter financial result that saw the bank recording a record $2.24 billion net profit. But before investors had the chance to pop the champagne, US Federal Reserve decided to gate-crash and spoil the party.
DBS’ latest financial result was released a day after the Fed unleashed the fourth interest rate hike of 75 basis points in this year. At the same time, the Fed also hinted of further interest rate hike ahead, albeit at smaller increase, in its bid to fight inflation. The latest move by the Fed sent global stock markets into another tailspin. In the process, DBS Group Holdings share price was rattled as well.
By right, banks should be the biggest beneficiaries from the interest rate hikes because of the increase in their net interest incomes. Yet the concern right now is whether the aggressive interest rate hikes could tip global economy into a long recession. In the face of a potential Singapore’s economic downturn, local banks will be the first in the line of fire. Due to this, DBS Group Holdings share price did not rocket despite delivering great financial results.
Apart from the recessionary risk, another factor for the sluggish DBS Group Holdings share price is the Singapore Overnight Rate Average (SORA), which was implemented only in the latter half of 2021. Unlike SIBOR, SORA is “backward looking”. Henceforth, there is a “lagging effect” before the positive impact from the interest rate hikes kicks in for DBS Group Holdings.
At the moment, DBS Group Holdings share price is in terminal velocity. The recent positive quarterly results sent the counter flying, only to be pulled back following the Fed interest rate hikes. Year-to-date, DBS Group Holdings share price increased by only 4.3% year-to-date despite four consecutive 75 basis point hikes by US Federal Reserve. As we enter into the tail-end of 2022, how will DBS Group Holdings share price unravel in 2023?
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 to sink or swim?
The gravitational pull of the Fed’s interest rate hike is indeed strong as it completely nullified the positive effect of the continuing good financial results of DBS Group Holdings. Whilst business fundamentals play an important role in valuation, market sentiments often prevail. In order for DBS Group Holdings share price to turn the corner, the current market fears must subside. Looking at the latest financial result, DBS Group Holdings should [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.]Lifetime Membership
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