Monday was a bloody day for STI, having dropped 6.03% (haven't seen this since global financial crisis!) As I am writing this, US markets are down a good 5-6% cos of the double whammy caused by virus fears and oil uncertainty.
But for me, I think this is a good chance to look at stocks that are normally expensive and now relatively cheaper to buy.
I have quite a number of picks but for now I am looking at DBS.
Currently priced at 21.15 (monday’s closing price) and based on a annual dividend of 1.32, dividend yield is a cool 6.24%.
A few factors I am noting for myself:
First: the Federal Reserve announced a pretty extreme rate cut which will affect banks in terms of factors such as Net Interest Margin (NIM). I think this is a pretty good read
here, but effectively, a low fund rate at Federal Reserve will reduce NIM and banks can potentially suffer a lower profit as yields on mortgages might be lower. The DBS report states potentially 6-8% lower profit, which can mean that we should not take the current dividend for granted.
Second: the current oil
crisis is also another area of concern. I am pretty worried DBS's exposure to the oil and energy sector and crude oil falling to $20-30 levels should not be taken lightly.
Third: of course the coronavirus is the top of the list. This directly affects the economy, consumption will go down and holidays cut. This uncertainty of the damage to the economy should keep DBS's share price even lower in the interim.
I am looking at levels below 20 for now to enter as my bullets are limited, but we will see again!
Lastly, I saw this
article and thought it was pretty interesting that the advice now is not to enter due to uncertainty. But perhaps uncertainty is opportunity too. What do you think?
Take care and trade well! Hoping all your trades are good. ($$$ below for everybody)
P.S tuesday market quite green now
