Hot stock: DBS up 3.02% after OCBC Investment Research upgrades it to 'buy' on price correction, strong fundamentals

DBS shares jumped 3.02 per cent or S$0.75 to S$25.55 as at 10.54am after previously dropping to its week-low price of S$24.646 on Monday.

The lender continues its recovery from a one-month low of S$24.06 on June 3, trending upwards along with its counterparts UOB and OCBC.

OCBC Investment Research upgraded DBS to a "buy" on Wednesday morning. The broker highlighted DBS's sharp price correction from a recent high of S$28.64 to a recent low of S$24.01.

It said DBS's share price has dropped by some 16.2 per cent over a period of five weeks. "While the trade tensions between US and China was cited as one of the main reasons, the other reason was the recent decline in interest rates," said OCBC.

In the last 10 years, DBS's net earnings have grown by a compounded annual growth rate (CAGR) of 10.6 per cent from S$2.04 billion for FY2009 to S$5.58 billion for FY2018.

Its dividend payout grew by a CAGR of 7.9 per cent during the same period from 56 Singapore cents to S$1.20 currently, OCBC added.

"With a S$1.20 dividend per share or 30 Singapore cents per quarter, DBS has some Reit-like traits including quarterly dividend payout."

Based on Tuesday's closing price of S$24.80, OCBC noted that DBS's dividend yield is 4.8 per cent.

It added that at the current price, it is an opportune time to accumulate DBS shares. OCBC's fair value for DBS remains unchanged at S$29.18.

The overall finance stock rally also follows a Moody's report on Monday, which said that the banks will be able to defend their market share against fintech competitors, despite the rapidly growing threats to their bank business from these companies.

The report said it was partly because the banks have abundant financial resources to invest in technology, whereas startups are facing increasing competition for funding.

Overall, an upbeat Straits Times Index was also up 1.38 per cent as at 10.57am, following other regional and global market rallies.