Looking Into DBS - When Will the Dream End?

Not any time soon, I reckon.

After witnessing the impressive rally that took place over the course of the past few weeks, I bought into DBS (D05) late at 17.80 with the intention of doing a bit of short-term trading. The stock has surged roughly 20% since Donald Trump was elected President of the United States, and it should continue to head upwards as we approach the New Year.

The Italian referendum took place on Sunday (4th December), and the Prime Minister has announced his resignation. DBS's price seemed to be unaffected on Monday - the stock price only dipped slightly before recovering and powering up to 17.90+ amidst positive sentiment. The wave continued on Tuesday, kissing the 52-week high of 18.20 before closing at 18.16.

Third quarter performance (3Q2016) exhibited good numbers, with total income rising 8% against the previous year (3Q2015). Lower operating expenses caused total expenses to fall by 5%. Net profit remained stable, due to higher allowances for bad debt.

Source: Yahoo Finance

Positive sentiment seems to have been fueled in the aftermath of the OPEC agreement, where OPEC member and non-member countries stunned critics by agreeing to cut oil production by January. While the deadline is still a month away, the news sent oil prices soaring. Brent Crude trades above $50 this week, though it might face some difficulty breaking $60 before January arrives. With the rise in oil prices, optimism has been injected into the Oil and Gas sector, an area in which DBS has a lot of exposure (as a major moneylender to the O&G industry). Additionally, the Singaporean government has stepped in to assist the Oil and Gas sector, announcing financial schemes to assist in financing projects through the Ministry of Trade and Industry. While this does not completely eliminate DBS's exposure to Oil and Gas turmoil, it does help to mitigate their position.

With the US Federal Reserve's upcoming rate hike in mid-December, both American and Singaporean bank-related stocks are also expected to rise along with interest rates - the effect on US interest rates has tended to spillover to Singapore markets in the past. Plus, DBS is currently among the top ten largest private banks in Asia, and they have recently made acquisitions in wealth management and retail banking from ANZ. 

The run doesn't seem to be halting any time soon, although profit-taking might occur after mid-December. I would anticipate a conservative short-term target price of 19.00. 

Until next time.

Creed