Informist, Monday, Jul. 7, 2025

MUMBAI – DBS, formerly known as Development Bank of Singapore, expects global growth to see a sharp slowdown amid US tariffs and the geopolitical tensions in West Asia. Today's conditions are in fact worse than earlier US tariffs on China enforced in 2019, which will prompt the US Federal Reserve to cut rates, Hou Wey Fook, chief investment officer of consumer banking and wealth management division of the Singapore-based bank said in a webinar.

US President Donald Trump's sweeping tariff policies announced in February had led to volatility in global markets, including India. The announcement raised major worries about a potential slowdown in global economic growth, a spike in inflation, and a likely hit on the financial performance of companies, especially those with significant exposure to US markets. Fed Chairman Jerome Powell, too, on multiple occasions commented about the elevated risks associated with US tariffs. He had also said the apex bank is not in a hurry to reduce key interest rates and would wait for more economic data to analyse the quantum of impact on the economy.

Global conditions are currently worse with Trump's "chaotic" tariffs, not just with China, but with the rest of the world, DBS said. "... in the tariff war, everyone is a loser. So we hope that there will be pragmatism at the end of the day after... some experimenting of tariffs." The bank also hopes that "rationality will prevail really soon."

TECH, AI ADOPTION

The Singapore-based bank also believes that headwinds related to tariffs are mitigated by the continuation of strong momentum in the technology space, notably the artificial intelligence segment. When artificial intelligence was just an emerging theme two years ago, DBS had said to go all in on this investment opportunity. "Since then we have seen more than doubling of share prices of AI leaders, and in the case of Nvidia, 4X (times)," it said. The growth trajectory of AI remains robust and augurs well for the outlook on US tech ecosystem, it said in its outlook report for 2025.

AI investments remain a major tailwind for the US macroeconomic environment and earnings growth outlook. Major tech companies such as Alphabet, Microsoft, and Amazon will invest a total of $250 billion in 2025 on AI-related infrastructure, as per the report. It also said that fund managers have an 'overweight' view on sectors such as communications services, healthcare, and financials.

These positive comments about the global IT sector come at a time when the sector has been feeling the heat of higher interest rates in the US, fears of economic slowdown, and likely tighter budget from clients on caution about tariffs. Indian IT companies have major exposure to the US, with many players earning more than half of their revenue from the world's largest economy.

DBS experts also believe that top information technology companies do not face major headwinds related to high capital expenditure as much of their semiconductor chip manufacturing is outsourced. "...we do expect double-digit earnings growth from these companies over the next five years," the Singapore-based bank said. US-based technology giant Nvidia is expected to achieve earnings growth of 30-40% annually, the bank said in the webinar. DBS said the market is not in a euphoria that could lead to a major crash in AI-related stocks globally. "In fact, we believe we are in the early innings of AI adoption," it said.

However, the rise of AI presents cross-sector challenges such as stress in energy, environment, and labour systems, according to DBS. AI-optimised data centres consume vastly more power than conventional infrastructure, requiring urgent investment in grid modernisation, renewable integration, and storage capacity, it said in its outlook report. DBS further said that it also leads to environmental issues such as emissions, overuse of water for cooling, and waste heat, elevating the role of advanced cooling and efficiency technologies.

GOLD – SAFE HAVEN

Gold has largely been in a consistent bull market for the better part of the last three years. DBS revised its target price on gold to $3,765 per ounce by Oct-Dec amid the backdrop of accelerating tailwinds under a changing world order, it said in the report. At 1429 IST, the most-active August gold contract on the Multi Commodity Exchange was down 0.2% at INR 96,777 per 10 grams.

"...we believe that gold is still sort of the purest expression of a safe haven asset," one of the experts from DBS said in the webinar. However, there is a possibility of tariffs being called off and successful trade deals being negotiated which would potentially derail the tailwinds for gold, the bank said. Gold's exposure to industrial demand is the least at 10%, while platinum is between 30% and 35%, and silver "is about half exposed," it said. End

US$1 = INR 85.11

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Reported by Anjana Therese Antony

Edited by Tanima Banerjee

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