FINANCIAL SERVICES | Staff Reporter, Singapore

DBS stock price sees a turnaround in Q4, surges 23%

It came from a low $14.97 to as high as $18.40.

While 2016, for the most part, has been a burden to the local banking sector, its latter part has proven to be a turnaround for the players, piling on strong gains after Trump’s election win in early November.

According to OCBC Investment Research, the index jumped from a low of 740.84 (on 9 Nov 2016) to a recent high of 809.28 (8 Dec 2016), up about 9.2% in one month. The brokerage firm noted that this gain was particularly seen for DBS. Its stock price surged from the low of $14.97 to as high as $18.40 for the same period, up some 23%.

"Understandably, Trump’s perceived pro-business view and expected focus on investment and infrastructure have a positive effect on corporate earnings expectations for 2017. This together with expectation of higher interest rates in 2017 are just some of the factors that led to the optimism and re-rating for the banking sector in some regional markets, Europe and the US. In Singapore, the average price-to-book (PB) ratio moved up from 0.95x in Oct to 1.05x by Dec," the brokerage firm said.

However, it noted that the banking sector is not completely out of the woods yet as the underlying softness for the Singapore economy and selective sectors including oil & gas and property remains.

"For DBS, the 5-year average PB ratio is around 1.15 but with a still mixed outlook for the region, we think that for the near term, the stock will continue to trade at a discount to this level, likely within the 0.95x-1.05x PB band (translating to fair value estimates of S$16.94 to S$18.72). With the recent re-rating of banking stocks, we have moved our valuation peg to 1x book, resulting in a fair value estimate of S$17.83," OCBC said. 

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