3 Potential Threats For DBS Group Holdings Ltd In 2017
Singapore’s largest bank, DBS Group Holdings Ltd (SGX: D05), released its 2016 annual report in late March this year.
In the annual report, the bank’s chief executive officer, Piyush Gupta, mentioned the possibility that the global economy could surprise on the upside in 2017. But, he also discussed three potential threats to DBS Group’s business. Let’s take a closer look at them.
Trade protectionism is one threat. Gupta wrote:
“A general border tax, if implemented, will have significant implications on Asia. But trade protectionism hurts the US more than many people think, and my own bias is that a pragmatic view will eventually prevail, and any controls implemented will likely be on selected industries.”
In late 2016, Donald Trump was elected as the President of the United States. Trump has an “America First” stance and that could lead to border taxes on countries importing to the US.
The interest rate hike
Gupta also cautioned against the rate of the interest rate hike:
“ A much faster interest rate hike cycle in the US than people are taking into account right now. This could create liquidity and credit challenges in Asia.”
As interest rates rise, loans could become more expensive. Gupta is wary of rates rising too fast, which he believes could cause problems in the credit market.
Finally, Gupta voiced concern over geopolitical developments in Europe and its potential impact on Asia too:
“Europe faces growing uncertainties in 2017, with upcoming elections in France, Germany and the Netherlands. In the face of China’s increased regional interests in Asia, there could also be rising tensions with the US.”
The rise of Trump’s brand of politics could be rippling into the European political scene as well. The increase in protectionism could also led to tensions between Asia and the US, which can be further complicated by China’s rise in the region.
With DBS Group’s business being dependent on the economic well-being of the Asian economy, Gupta may have his eyes on geopolitical developments in the region.