DBS Group lost 30% of its market cap in the first quarter of 2020
Singapore’s most valuable company DBS Group has seen over a quarter of its share price eroded since the start of the year.
Since the first coronavirus case was confirmed in Singapore on 23 January, Singapore’s largest financial institution DBS Group has seen share price plunge by as much as 36.57%.
On Monday 23 March, the money lender saw its stock value depreciate to S$16.85 – its lowest level since January 2017, based on IG trading data.
The group’s share price has since recovered slightly. It is currently trading at S$18.23 a share as at 15:55 SGT on 01 April. This represents a 29.78% decline in share price for the first quarter of 2020.
DBS Group's short sell volume burgeoned over 100% in March
Due to the drop in share price, short sell volume on the counter rose to this year's peak of 4.25 million shares on 09 March, a day that saw share price crash by 8% in one session. The highest one-day short sell volume in February was 1.87 million shares.
Separately, an annual general meeting (AGM) initially scheduled for 31 March has been postponed until further notice.
DBS Group also started buying back shares on 26 February. It has purchased 21.4 million shares from the market as of 24 March. This is less than half of the number of shares that the company is authorised to purchase under its current mandate (based on a Singapore Exchange circular posted on 22 March), which would have been reviewed at the AGM.
Global coronavirus updates continue to impair stocks
Like many other financial markets around the world, the Singapore stock market continues to be affected by global state coronavirus-related updates – good or bad.
In our most recent update on DBS on 16 March, for instance, we had reported that the group’s share price fell 3.98% the day following the US central bank’s sudden reduction of the Fed fund rate.
Bloomberg Intelligence analysts had previously told IG Asia that Singapore banks were expected to be impacted heavily by upcoming US interest rate movements.
Diksha Gera, Sector Head, Global Financials Research, said in a research call last month that ‘Hong Kong banks are the most geared toward US interest rates, followed by Singapore banks’. In saying that, she added that there’s also a possible ‘second order impact’ of whether Asian regulators and central banks will decide to follow the US Federal Reserve rate moves.
Analysts lower DBS Group’s share price targets
For now, CIMB analysts are of the opinion that the Fed rate cuts will eat into DBS Group’s net interest margins (NIMs) by 12 basis points (bps) in the 2020 financial year, and another five bps in 2021.
RHB researchers had already earlier cut their NIM forecast for DBS Group’s 2020 financial year to 1.78% from 1.81% on the back of the last round of FFR reduction. They stated that the first cut on 03 March of 50bps to 1.25% had led to a sharp fall in three-month SIBOR to the current 1.35%, versus February’s 1.69%.
On that note, they have reiterated a ‘neutral’ rating on the stock and lowered share price target from S$24.80 a share to S$21.50.
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