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DBS share price: Why one analyst thinks the stock is worth buying

Even though DBS Group's shares fell right out of the gate to a two-week low on Monday, one analyst likes the stock for its sustainable dividend yield.

Source: Bloomberg

DBS Group Holdings saw its share price drop as much as 2.4% on Monday 15 June 2020, amid growing concerns over a second wave of Covid-19 infections.

As the session progressed, Singapore’s most lucrative company by market capitalisation slid even more to close at S$21.21 a share – its lowest level since 03 June 2020.

Investors remain in a contemplative mood: analyst

As IG Asia market strategist Pan Jingyi wrote in her latest client note, a risk-off mood has carried over into Asia this week, despite the Wall Street retracement that had taken place on Friday.

‘The market remains in contemplation as to whether prices had overran with the initial reopening optimism after last week’s dip post the recent surge in prices,’ Pan wrote, adding that new cases recorded in Beijing and various states across the US were also fuelling fresh concerns among investors.

Are you looking to trade stocks of DBS Group and other Singapore finance companies without having to buy and sell the actual assets? You can explore CFD trading by signing up for an IG account.

As at the close of Monday, Singapore’s blue-chip barometer Straits Times Index is down roughly 2.3% from Friday’s closing price.

Why DBS’ share price soared 18% at the start of June

In the last one month, DBS – like most other equities – has experienced a massive rebound in share price, as investor sentiments became increasingly optimistic on the back of Covid-19 lockdown easing around the world, as well as here in Singapore.

Singapore entered a so-called ‘phase one’ of its lockdown easing on 02 June 2020, under which firms in the manufacturing and services sector, among others, were allowed to resume operations.

Following that, DBS’ share price soared over 18% to a three-month high of S$23.50 on 10 June 2020.

Prices have retraced since, but remain lifted by roughly 8% from May 2020’s average range of between S$19.30 to S$20 a share.

DBS share price target: S$20.38

For now, the government has indicated that it will move into a ‘phase two’ if community transmission rates stay low and stable over the subsequent few weeks, and foreign worker infection rates – where the bulk of cases have been reported – are kept under control.

Earlier this month, Singapore’s three main banks – namely DBS, alongside United Overseas Bank (UOB) and Oversea-Chinese Banking Corporation (OCBC) Group – saw their stock prices increase as much as average of 11%, as countries globally began to map out their economic recovery plans.

As of 15 June 2020, DBS has received a consensus 12-month share price target of S$20.38 from five analysts, based on reports dating back two months. Three out of five analysts gave the stock a ‘hold’ rating.

UOB analysts, however, issued the stock a ‘buy’ rating and a price target of S$22.30. They said this was because the stock is positioned to provide sustainable dividends that will be able to rise progressively.

How to trade Singapore stocks with IG

Are you feeling bullish or bearish on DBS Group, OCBC, UOB and other Straits Times Index (STI Index) stocks? Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG's world-class trading platform in a few easy steps:

  • Create a live or demo IG Trading Account or log in to your existing account
  • Enter <company name> or <ticket code> in the search bar and select it
  • Choose your position size
  • Click on ‘buy’ or ‘sell’ in the deal ticket
  • Confirm the trade

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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