Tuesday, November 25, 2014
DBS: Citi believes that DBS undoubtedly benefits from US rates normalization, but recent market activity (some days’ turnover 2x the 1-year average) and >2S.D. price ratio outperformance vs. the FSSTI, suggest this is a clear consensus long. Risks include: 1) US rate hikes may be modest: Eurodollar Futures is pricing in 80bps by end-2015, from 110bps two months before. At 80bps US rates, implied 3M SGD SIBOR may be c.55bps (vs. 42bps now). 2) Growth outlook is uncertain: Citi have concerns for Singapore domestic growth and regionally. DBS management also pared loan guidance, citing China’s macro outlook as a key variable. Citi remains positive on the DBS medium-term growth story, calling a Buy with TP of $22.10.