DBS Group Holdings share price to crash in 2024?
Lifetime Membership A brand new year! How will DBS Group Holdings share price perform in 2024? Looking back, 2023 should be a roller-coaster ride for investors as DBS Group Holdings share price surged to a high of $36.20 on 10 February 2023, only to then free-fall all the way to $30.30 on 31 May 2023. The volatility of DBS Group Holdings share price in March 2023 was attributed to the collapse of several US regional banks, sparking fear of global financial contagion.
To add oil to fire, DBS Group Holdings share price came under further pressure in April 2023 following news of $1.3 billion loan exposure to beleaguered Adani Group and the infamous service outage, which led to the Monetary Authority of Singapore (MAS) branding the disruption as “unacceptable”. Somehow, DBS Group Holdings share price managed to overcome these setbacks to end the year at a respectable level of $33.40.
As we enter 2024, questions abound if the US bank crisis is truly over. According to a paper by National Bureau of Economic Research, more than US$2 trillion of US bank asset values had been wiped off since monetary tightening of 2022. In particular, commercial real estate loans came under the spotlight due to declines in property value across US. The decline in commercial office values is due to high vacancies – many US office workers are still not returning to office post-COVID. Notably, the paper postulated that up to 300 regional banks in US could fail in 2024.
A US economy hard-landing, coupled with the current China’s economic slow-down, could be a recipe for disaster. Let’s not forget that when the Great Recession (sparked by US subprime mortgages) took place in 2008, China’s economy was largely insulated. If the world two largest economies were to sink into downturn at the same time, expect a Great Depression in 2024.
With US Federal Reserve expecting to cut interest rates three times in 2024, sentiments are starting to turn bearish for DBS Group Holdings. In fact, the first trading week of 2024 saw DBS Group Holdings share price in sluggish form as the counter hovered around $33. However, it may be too early to dismiss the potential of DBS Group Holdings share price at this juncture as multiple factors come into play.
Firstly, even though interest rate cuts should happen in 2024, the Singapore bank has “$105 billion of fixed rate assets that have yet to reprice this rate hike cycle” according to the transcript for DBS third-quarter 2023 results briefing. This is a substantial amount that could be a strong catalyst for DBS Group.
Secondly, the consolidation of Citi Taiwan brought DBS Group to another whole new level with the addition of $10 billion worth of loans and $12 billion of deposits. It also boosted DBS Taiwan’s credit card accounts by five times to over 3 million and tripled investment assets under management to over $12 billion. Notably, Citi Taiwan added 3 basis points to the Net Interest Margin (NIM). In years to come, Citi Taiwan should provide a strong support for DBS Group Holdings share price.
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Thirdly, though interest rate cuts may affect DBS Group Holdings’ earning, the impact should be gradual as Singapore Overnight Rate Average (SORA) has replaced SIBOR. This is because unlike SIBOR, SORA is “backward looking”. Henceforth, there is a “lagging effect” before the positive impact from the interest rate hikes kicks in.
With 5-year beta of 1.34, DBS Group Holdings share price is surely volatile. Nonetheless, it is possible to make money out of the volatility of DBS Group Holdings share price provided you set the right entry price. Based on the trend of the past 3 years, it seems that the support level for DBS Group Holdings share price should be around $30. In this article, I will weigh in on the outlook for DBS Group Holdings share price in 2024.
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.
Hit and run with DBS Group Holdings share price?
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