Why Singapore REIT drop so badly ?

Today Singapore industrial REIT drop around 7% e.g. Cambridge industrial REIT.
Fortune Reit a dual listing stock in both HK and Singapore drop nearly 7%.
The Link REIT one of the bigger commerical properties REITs in HK. It drop nearly 4%.

I invest heavily in Singapore industrial trust since 2010. I never experience such heavy drop.

Causes of  correction.
1. Margin call is NOT the main reason. I confirm with my stock broker that most REITs investors are cash rich. They buy in cash not margin trading.
2. Profit taking. REIT perform too well recently. Any correction will trigger profit taking
3. Outlook for properties are health. However,with after Singapore Government's cool down measures.  And market is expecting that US federal reserve may reduce size of QE. In result, Singapore properties market will not grow as quick as past 2 years. But REITs are trading 20 to 30% above their Net asset value. They may be consider as overvalue. Although their PE is only 10, REITs always include property value increase as their earning. If properties price don't appreciate as quick as last year, REITs earning will reduce. i.e. PE will go up.
4. Foreign investment outflow

US$ exchange rate peak at 23 May and today. Industrial REIT dropped 7% on 23 May and so also today. US$ exchange rate peaks and REIT drop on the same day. US dollar and stock are going up. Which may look more attractive than Singapore REIT. Foreign fund Sell REIT and buy US$ to send oversea.

My opinion is that correction could slow down when stock price is reasonably reflect its' net asset value. It could be 10 to 20% down from today.

Strategy:
 Sell in May. Hold on with your cash and bond. 

Sell in May - Part 2 stock sold

On my 1st post "Sell in May" dated 2 May. I recommended to sell stock and buy bond. And my another  post dated 23 May "Withdraw of QE will not crash USA market" . My opinion was "market over react" to Federal Chairman's announcement. I bought REIT with 7% discount instead of selling.

After market recover on Monday and Tuesday, I sell 30% of my stock included REIT.  My opinion remain in "Sell in May". Reasons are

1. USA market reach record high, upside is restricted but not downside. World markets are interacted. Singapore market will follow.
2. Markets are expecting that US$ go up further. US asset will look more attractive. i.e. investor may sell Asia $ asset to buy US$ asset
3. China share ,especially all major Chinese banks, their dividend book closure date are concentrated on June. They pay dividend once a year. Therefore dividend amount are more than those shares pay 4 times a year. After book closure, dividend will be deducted from Share price. Share price will look like drop 3 to 5%. It may trigger margin call selling. Besides, China share will normally go down after book closure. This year may be the same.

My strategy

 Sell in May. Maintain high cash and bond level.  Buy Bank of China after book close on 7 June 2013 

Shall we buy SPH Reit ?

SPH will put 2 Malls into their new Reit. "SPH plans to hold 70 per cent of the units in SPH REIT, whose assets are the Paragon shopping mall in the city-state's prime Orchard shopping district and Clementi Mall in a western suburb" - asiaone.com


My option is that it is good for SPH shareholders. SPH net asset value and cash will increase.

Whether SPH REIT be an good investment ?

Paragon Shopping Mall will be leased 99 Yrs to REIT. Valuation of free hold properties are high in result rental return ratio is lower. SPH REIT major investment will be Paragon. Which may hint to lower distribution yield ?

Too many shopping malls in Orchard Road. Paragon Mall located further away from Orchard MRT station. Paragon's car park is always full. It is not easy for shoppers to go to Paragon Mall. My guess to SPH REIT yield could be around 3 to 4%. It may be difficult to grow rental in Paragon especially Orchard Road. Rental increase could be 1 to 2% per year.

New SPH REIT announcement may help to improve sentiment after last Thursday 7% drop in REITs price. I will be concentrating in well perform industrial REITs. Which provide 6% rental yield. Industrial rental is cheaper than any other properties. $3 psf increase 10% is $3.3. It is still affordable. Industrial REITs yield will continue to grow faster than any other REITs. 


http://www.asiaone.com/News/Latest%2BNews/Singapore/Story/A1Story20130527-425476.html
http://www.fool.sg/2013/05/its-a-deal-sph-to-spin-off-properties-into-reit/

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Withdrawal of QE will not crash USA stock market

Today Federal reserve announce that it may withdraw from QE. Asia markets drop

My 1st post on 2nd May "Sell in May". I predicted correction will happen. And on my "Inflated asia asset" dated 7 May. I recommended to sell stock and buy bond.

Correction happen today. But I think markets are over reacted with the news. QE will not slow down in next 3 months. USA employment rate start to recover. But it is too early to confirm the trend. QE will be continued until employment market turn more health. It may happened in 4Q 2013. Employment rate is related with companies performance. Health employment rate require health companies earning. QE will withdraw at the same pace as earning and employment improvement. The effect of QE withdrawal shall be little. Federal Reserve will not allow QE withdrawal to crash the USA market.

Federal Reserve's statement signal low interest rate driving is nearly over. And Market shall be powered up by improving cooperate earning.

I buy REIT (Cambridge, Sabana) in Singapore Market today. With 7% discount, it seem to be good deal. I guess Monday 27 May 2013 market shall be stable. REIT will recover some of their lost. I shall have enough time to unload my stock and buy bond.



 

Beginner's guide for new stock investor - Timing

Beginner's Guide for new stock investor

Timing

 

I concluded all my painful lessons in investing. Timing in my top priority.

 

If market index was near 52 weeks high, you should stop buy in any stock. It could be too expensive. However, many investors think otherwise - buy high will go higher. This could be true for a short period of time. But it was so expensive, upside would be little but downside was terrible.

 

If market index was near 52 weeks low. You should buy in actively. Market could go down further. But upside is rewarding. There must be reason to be afraid. Investor are willing to sell to you at lower price when market believe it would go lower. 

 

It need a lot of courage to buy at low. Test yourself  in next market low (May be in 2013 July ?)

 

 

Beginner's guide for new stock investor

There are a lot of books about investment. Beginners are drowned with information. So I try to put this guide as simple as I can

1. Timing - Buy at low. Wait for the right timing

2. Source for the right company share to buy. Low P/E and Low Price/ NAV ratio. But high dividend

P/E shall be around 10
Price / NAV less that 1.5
Dividend Yield shall more than 3%

3. Buy at low price and hold on for long term benefit.

Inflated Asia asset

With excessive liquidity and low interest rate, Asia asset e.g. home price, stock ... are inflated. Some Asia government e.g. Singapore, Hong Kong and China put restriction in loaning.

But it is not good enough. Asset price was pushed up by low interest rate. Government restrictions slow down transactions. Some investor plan for quick profit. But now they can't sell due to government restrictions. They can hold on as long as interest rate are low.

However in 2 years time, a lot of new units will be completed. While interest rate may go up. Some investors will not able to serve their loan with high interest rate. Non perform loan will increase. And banks tighten new house loan. Property price will go down further. Company profit affected by high borrowing cost and falling property price. Share price will go down together with property price

Strategy: Sell stock & property, buy Singapore bond and China stock

Save the trade imbalance world - Arise! All those who don't want to be slaves! -

Chinese lyrics : Arise! All those who don't want to be slaves!

ECB cuts its main refinance rate to 0.5%. Devaluing Euro, USD and Japanese Yen will slowly improve trade imbalance. However, the world trade imbalance will be not fixed until "arise" of Chinese consumers.

China export many products at very good price. Countries will be continue importing from China. Only when Chinese internal demand increase. China will increase their import. And their export price will be  driven up by strong domestic demand. As a result, export will slow down and import increase. Trade imbalance will improve.

Shall we give our blessing to all Chinese consumers ? I think I will ...

My recommendation: Maintain 20% cash 30% bond 50% stock

Sell in May. Yes history may repeat this year in Singapore

Sell in May, run away. Will it be the same this year ?

Most companies released their 1Q result and their dividend book close in April. No further good news to push Singapore stock market.

I guess market will correct in May as last 3 years.

But bear in mind world economic are slowly recovering.Unless WAR or SARS like disease outbreak. This year's correction would be mild.

Investors are taking precaution. OLAM bond R9JZ go up from S$0.95 to S$0.99. Genting Bond P9GZ go up to S$1.05. They are switching from stock into bond to lock their profit.

My focus is bond / REIT ... old man stock .. Ha Ha