The Fed is scheduled to reconvene 2 weeks later on 21-22 March to decide on the next monetary policy and the odds have recently risen that the Fed may announce an interest hike of 50 basis points rather than the previously widely expected 25 basis points, after recent hawkish stance by the Fed chairman in his semiannual monetary policy report to the Congress dented hopes by Wall Street on a monetary pivot.
With renewed hawkishness on interest hikes to tame the stubbornly high inflation sticking longer than expected, the market is increasingly pricing in a recession.
While banks stand to gain from higher interest rates, extreme hikes will eventually raise their costs of funding as they compete for deposits, while businesses rein in their investments during economic downturn and banks' provisions for doubtful debts may rise when the borrowers struggle to repay under economic hardship.
Nevertheless, I'm cautiously optimistic of the performance of our local banking trio, and look to add my holdings of their shares. With their strong balance sheets and robust fundamentals, I believe that they will emerge stronger over time. Their recently announced increases in dividend payouts also appeal to income investors like me. In fact, I just added $DBS GROUP HOLDINGS LTD(D05.SI)$ at $33.26 this morning, thanks to the commission-free trade and stock voucher from Tiger Brokers!
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