Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

Singapore's biggest bank is riding on Donald Trump.

Since the Nov. 8 American election result, DBS Group Holdings Ltd. has been the best performer among the 65 lenders on the MSCI Asia Ex-Japan Banks Index -- up 20 percent in U.S. dollar terms, almost triple the gain in the benchmark gauge.

Breakaway Bank
DBS tops the list of best-performing Asian lenders since the U.S. election verdict
Source: Bloomberg
*For members of 65-stock MSCI Asia ex Japan Banks Index.

Something about the rally beggars belief. Why should investors in a Singapore bank get so excited about the Trump reflation trade when neither the dollar, nor the U.S. bond market, are overly impressed? Singapore's own interest rates don't suggest a resurgence of pricing power over loans. The Singapore dollar swap offer rate, which jumped after the election, is again heading lower.

No Pricing Power
Singapore's main interest rates have leveled off while DBS shares continue to power ahead
Source: Bloomberg

Nor are borrowers likely to start bingeing on cheap loans. Deploying depositors' money is becoming a pain. The housing and commercial property markets are still grappling with oversupply, and business investments are going nowhere.

As the Business Times reported this week, none of the island's three lenders have launched a customary Lunar New Year promotion for savers. DBS is paying just 0.35 percent for one-year fixed deposits. The $196 million that the lender raised from the bond market in the final three months of last year was the least in 13 quarters, according to data compiled by Bloomberg.

Reflation, Anyone?
Singapore oil-services firms' shares have only just started to look up; a full recovery is still far away
Source: Bloomberg
*Market capitalization-weighted index of 14 stocks.

Maybe some DBS investors are expecting firmer energy prices to end the carnage in Singapore's oil-services industry. But while shares of the most indebted offshore and marine companies are up more than 30 percent from their September lows, they're still down 80 percent from a 2014 peak. Expectations of a quick turnaround in their -- or their banks' -- fortunes might be unrealistic.

Nor is the 46 percent surge in impaired loans at the bank's Hong Kong unit in the first half of last year going to quietly fade away. Things will probably get worse before they get better. Provisions for bad loans at DBS are running well below their long-term average, banking analyst Daniel Tabbush wrote last month in a note published by the Smartkarma website. As the lender beefs up its thinning loss cover, earnings may take a hit.

For now, DBS shareholders couldn't care less. Even the demise of Asia's most ambitious trade accord -- the proposed Trans-Pacific Partnership -- is unable to shake their trust in the Trump reflation trade. The longer the dream goes on, the ruder may be the awakening.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Andy Mukherjee in Singapore at

To contact the editor responsible for this story:
Paul Sillitoe at