DBS Group share price to melt with 41% GDP drop?

Sign up & unlock articles! It’s official. Singapore has entered into recession following the 41.2% GDP drop in the 2nd quarter from the preceding three months. As the bellwether of the economy, the financial performance of the banks is sensitive to the economy condition. In this regard, will DBS Group share price melt in the coming weeks?

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DBS Group share price

The mind-blowing decline of 2Q’s GDP is obviously caused by the COVID-19 and the resulting circuit-breaker measures. Many analysts shuddered to think what would have happened if the government did not implement the four budgets worth nearly $100 billion. The rescue packages helped to mitigate the impact for most businesses and stave off mass unemployment. Looking back, this could be the major factor why DBS Group share price had not collapsed to abysmal levels until now.

Despite the devastating effect of COVID-19 pandemic, year-to-date, DBS Group share price had corrected about 18%. The bearish form was because the bank has a huge loan exposure of $85 billion in the building and construction industry. This is the largest among its loan portfolio. As the construction sector is the worst hit during this crisis, DBS Group share price is in for a rough ride.

Against the backdrop of a recession in Singapore, will DBS CEO Piyush Gupta buy his company shares? And what could the impact for DBS Group share price if he really did? During the 2014 oil crisis, DBS Group share price had collapsed 36% to reach a bottom of $13.60. In 2016, CEO Piyush Gupta had bought the company shares at around the price range of $13.90. From the day he bought DBS shares, this counter keep flying to hit a record $30 in April 2018.

Notwithstanding the above, the business strategies implemented by DBS CEO Piyush Gupta in the early years of his tenure mean that the bank will ride the storm comfortably. In fact, with Price/Book value of just 1.00, the current DBS Group share price is trading at very attractive level. In this article, I will share my insights on the outlook for DBS Group share price.

BullionStar

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 share before. Whether DBS Group 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 share price thrashed by big boys

While it is unknown if DBS CEO Gupta will buy his company shares again, the past few months saw one of the biggest equity sell-offs against bank stocks in recent years. The majority of the sell-offs were led by institutional players, signalling the lack of confidence among the big boys on the growth outlook for local banks. Due to this, DBS Group share price had been bearish since the pandemic outbreak.

In March 2020, DBS Group share price crashed following the exit of institutional funds, which net sold $879 million worth of DBS stocks. This made DBS stock the heaviest net sold counter by fund houses in March. The sell-off continued in April and May as DBS remained in the top ten list of heaviest net sold counter by institutional fund houses.

However, in June 2020, DBS Group share price saw a turning point as [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: July 18, 2020 — 10:26 pm

2 Comments

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  1. Hi Gerald, it’s traded around $21+ recently. In light of all the difficulties mentioned in your analysis, how would it be traded around $23-25? Your narrative appears to be inconsistent.

  2. Hi Leo,

    You are right in pointing out the inconsistency. It was actually a typo error and I revised the price range to be $21 to $23. Despite the challenges, the strong fundamentals of the bank should enable the share price to be resilient. I honestly doubt that the share price would breach the $20 level.

    Thank you so much for the feedback.

    Regards,
    Gerald
    https://sgwealthbuilder.com

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