OTCS Special Market Outlook 2023 – Inflation, US Markets and REITs

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Do you know where are the risk and opportunities in 2023?

2022 saw rising inflation & S&P500 in down trend

Fed is planning to whatever it takes to tame inflation. Is it good for your portfolio?

Will the markets crash in 2023, or climb higher?

Shortly into 2023, we saw S&P500 recovering. Will it continue?

 

Timestamps

1:44:30 Intro

1:48:37 Market Recap: Singapore REIT Index performance; comparison with STI and Financial Index

  • 1:58:02 US Fed Hike Rate

2:00:42 Things to look out for in 2023

  • Keeping an eye on Net Asset Value/Unit and DPU growth trends

 

2:04:15 Why you need to look at financial ratios of a REIT and not just yields:

  • EC World REIT Case Study: Debt Management
  • Unsecured Borrowings

2:08:35 Capitaland Ascott Trust Case Study

2:10:23 Manulife US REIT Case Study: Risk of breaching 50% gearing ratio limit

  • How MUST could try to reduce its gearing ratio
  • Portfolio valuation dror

2:15:03 My radio interview on the S-REIT Market Outlook for 2023 (or view here)

2:17:32 REIT Investing Strategy for 2023

  • REITs are cyclical, despite poor performance during 2022

2:19:39 Summary

2:22:12 How your Investment Portfolio should look like

 

 

 

 

OTCS invited 3 expert practitioners to share with us their market outlook for 2023; where are the risks and the opportunities in the Singapore and US markets.

  1. James Yeo
    – US Markets
    .
  2. Ian Low
    – Bonds, REITs, STI
    .
  3. Kenny Loh
    – REITs

Bring your most pressing questions about Stocks, REITs, Bonds, SG and US Markets as we will have a Q&A segment for you to get your answers. 

 

Kenny Loh is an Associate Wealth Advisory Director and REITs Specialist of Singapore’s top Independent Financial Advisor. He helps clients construct diversified portfolios consisting of different asset classes from REITs, Equities, Bonds, ETFs, Unit Trusts, Private Equity, Alternative Investments, Digital Assets and Fixed Maturity Funds to achieve an optimal risk adjusted return. Kenny is also a CERTIFIED FINANCIAL PLANNER, SGX Academy REIT Trainer, Certified IBF Trainer of Associate REIT Investment Advisor (ARIA) and also invited speaker of REITs Symposium and Invest Fair.  

You can join my Telegram channel #REITirement – SREIT Singapore REIT Market Update and Retirement related news. https://t.me/REITirement

Continue ReadingOTCS Special Market Outlook 2023 – Inflation, US Markets and REITs

Money and Me: S-REITs’ 2023 outlook

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3rd January 2023

Money and Me: S-REITs’ 2023 outlook

Which SREITs stand to become beneficiaries of investors seeking resilient yield and growth opportunities in a high interest rate environment? And with China taking a major step towards reopening its borders, is it finally time to stock up on companies with high exposure to the Chinese market?

Start your year right with Michelle Martin as she speaks to Kenny Loh, REIT Specialist and Independent Financial Advisor about his thoughts on the performance of SREITs in 2023 and some sectors to avoid during this period of volatility.

 

 
 

Timestamps

0:17 Intro

1:45 JP Morgan’s cautious outlook for Singapore REITs, expecting declines in DPU and economic slowdown weighing on share price performance. What are your thoughts? Do you agree?

  • Yes, I agree. But not all REITs will be affected to the same extent. It depends on individual REIT’s performance and their management.
  • However, a severe recession and/or high Fed Fund Rates may affect REIT’s performance more negatively

3:52 Which REIT sectors do you think offer resilience?

  • Industrial Sector. WALE is comparatively higher and has delivered consistent DPU for the past few quarters. Also is much harder for Industrial Sector tenants to ‘move out’
  • Most vulnerable: I think the US Commercial Office Sector. For Example, Manulife US REIT announced a ~10% drop in portfolio valuation.
    • WFH trend still exists, therefore still low occupancy. Valuers are using a higher discount rate due to the higher Fed Fund Rate.

6:01 Many expect Fed Fund Rates to go over 5%. Which REITs could be attractive for investors looking for ‘safe harbours’?

  • I think 2 Sectors: Hospitality and Retail, due to the China reopening barring any new COVID variants. Chinese travelers embarking on ‘revenge spending and revenge traveling’.

7:10 Do you think Rate Hikes will influence share price movement of S-REITs, and if so, how much?

  • S-REITs have already been priced in a Terminal Rate of about 5%. 
  • But not a recession. We do not know if we will enter a severe recession, and will REITs’ bottom lines be affected.

6:41 Do you think S-REITs factored in additional rate hikes in their share price valuation?

  • Yes, looks like it has factored in a Fed Fund 5% rate. The recent lowering of government bond yields has increased yield spread.

8:26 Raising GST to 8% and then 9%: How do you think this will affect S-REIT investors?

  • I don’t think there’ll be any impact. 
  • GST hike only affects local consumption in Singapore. Many REITs have overseas presence; these REITs shouldn’t see any impact.
  • Also, many travelers (e.g. Chinese tourists embarking on revenge traveling) won’t bother about this 1% GST hike.
  • For the tenant side, 1% won’t move tenants away. Too much of a hassle 

10:21 China’s reopening: China was Singapore’s largest source of inbound tourism. Is it time to look at S-REITs with China exposure?

  • We should be selective and careful.
  • Generally, Singapore REITs with China Exposure have poor balance sheets. 
  • Also potentially increased difficulty faced by S-REITs in refinancing due to debt crises in China. E.g., EC World REIT in 2022

12:10 EC World REIT has announced divesting of 2 assets in October 2022. With China reversing its COVID policies, what does this mean for EC World?

  • The challenge for EC World REIT is debt management.
  • 100% of its debt is secured, also they have a very short debt maturity period.
  • Unlikely to divest at a good price. But they have no choice

14:45 SPH REIT has been renamed to Paragon REIT. What does this mean for Paragon REIT?

  • Paragon sounds more ‘atas’, SPH feels older in my opinion.
  • 3 Possibilities, how I look at it:
    • 1. Acquisitions should continue, for example Seletar Mall in the pipeline. However, it is not easy in this current high interest rate environment.
    • 2. Mapletree has a stake in Cascaden Peak (Sponsor of Paragon REIT). MPACT also has a very similar investment mandate of Asia-Pacific Retail/Office properties; I can see a potential merger on the horizon.
    • 3. Acquired by Link REIT? Link REIT are expanding into Singapore.

18:21 Outlook on S-REITs in 2023?

  • Many opportunities in the S-REIT space! Most REITs are undervalued right now (according to Price/NAV value)
  • Rising interest rates will dampen portfolio valuations

Note: The above analysis are my own personal views and are NOT buy or sell recommendations. Investors who would like to leverage my extensive research and years of Singapore REIT investing experience can approach me separately for a REIT Portfolio Consultation.

 

Listen to his previous market outlook interviews here:

2022

2021

2020

Kenny Loh is an Associate Wealth Advisory Director and REITs Specialist of Singapore’s top Independent Financial Advisor. He helps clients construct diversified portfolios consisting of different asset classes from REITs, Equities, Bonds, ETFs, Unit Trusts, Private Equity, Alternative Investments, Digital Assets and Fixed Maturity Funds to achieve an optimal risk adjusted return. Kenny is also a CERTIFIED FINANCIAL PLANNER, SGX Academy REIT Trainer, Certified IBF Trainer of Associate REIT Investment Advisor (ARIA) and also invited speaker of REITs Symposium and Invest Fair.  

You can join my Telegram channel #REITirement – SREIT Singapore REIT Market Update and Retirement related news. https://t.me/REITirement

Continue ReadingMoney and Me: S-REITs’ 2023 outlook

Money and Me: Is 2023 the year of recovery for S-REITs?

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13 December 2022

Money and Me: Is 2023 the year of recovery for S-REITs?

As we wrap up 2022, who are the S-REITs winners and losers coming out of this year’s market turbulence? Find out the answers with Dan Koh and Zia-ul Raushan as they invite Kenny Loh, REIT Specialist and Independent Financial Advisor to share how he thinks S-REITs have performed so far. 

They also discuss the opportunities and risks that 2023 presents for this industry and the sectors that stand to benefit the most from China’s reopening of its economy. 

 

 
 

Timestamps

0:17 Intro

1:25 Wrap up of the S-REIT performance in 2022 and Kenny’s thoughts of the market now

  • REITs still fared better than other asset classes, at -10%, compared to for example the S&P 500 and bonds

 

2:35 Winners & Losers of this year S-REITs

  • No clear winner, but Hospitality Trusts fared better than the other sectors
  • Most REITs suffered losses, except CDL and Far East Hospitality Trusts with single digit gains.
  • Manulife US REIT dropped -50%, Digital Core REIT -47% and Prime US REIT -45%. Worst performing sector this year is the US Commercial Office sector.

 

3:27 S-REIT market outlook in 2023. With recession looming, what does a recession mean for S-REITs?

  • A US Recession does not mean a recession in Singapore.
  • S-REITs may not be impacted as a whole. It depends on S-REITs with portfolio presence in affected countries (e.g. a US recession will affect S-REITs with US presence).
  • Also dependent on the sector

 

5:09 Fed Fund rates poised to reach 5% next year. Is the slowing down of the rate hike good for S-REITs?

  • Good for S-REITs. The rapid rate hikes this year are too uncertain. A slowing down gives more predictability and visibility for REITs.

 

6:41 Do you think S-REITs factored in additional rate hikes in their share price valuation?

  • Yes, looks like it has factored in a Fed Fund 5% rate. The recent lowering of government bond yields has increased yield spread.

 

7:25 Any indication of how S-REITs are to perform next year?

  • Most REITs are healthy, but some REITs have ‘warning signs’, for example high gearing ratio REITs like ARA Hospitality Trust or low ICR.

 

8:31 8% GST Rate Hike: What impact will it have on S-REITs?

  • There should be low/minimal impact. Mainly affects local consumption in Singapore. Especially for S-REITs with overseas exposure, they will not be impacted.

 

9:05 Which S-REITs can tide us through a potential recession in 2023?

3 Criteria for me:

  • Track Record of increasing NAV/Unit and DPU growth
  • Low Gearing Ratio and healthy ICR
  • Has a well-diversified portfolio

 

10:24 What should we watch out for? Any sectors to avoid?

  • No sectors to avoid, individual REITs’ performance is much more important
  • Poor performing REITs (especially even in good economic conditions) may perform even worse
  • High Gearing Ratio and low ICR can cause debt refinancing issues for REITs

 

11:54 China has announced the easing of COVID-zero measures. What effect will this have on S-REITs?

  • Expect ‘revenge travelling and spending’ of Chinese Tourists
  • Mainland China occupied No.1 spot in Tourism Receipts in Singapore in 2019
  • 54% of their budget goes to shopping and 15% in accommodation
  • Benefits the Retail and Hospitality Sector

 

13:26 To what extent will China’s reopening offset the global slowdown and on Singapore’s economy?

 

14:37 What should we be aware of when adding S-REITs with China exposure to their portfolios?

  • China has gone through debt crises in the past 2 years, giving REITs headwinds when refinancing due to increased difficulty in acquiring favorable loans 
  • Healthy Balance Sheets are very important

 

15:57 Will 2023 be the year of recovery for S-REITs?

  • Yes, Interest Rates should be peaking in the next year.
  • However, 2 Risks:
    • Further increases in Interest Rates (maybe above 6-7% and beyond) may cause another S-REIT market crash due to reasons
    • S-REITs may perform badly if there were to be a severe recession

 

17:00 What is your approach when investing in S-REITs and any tips?

  • No one can predict the market and the macro-environment. Don’t worry about what we cannot control.
  • Focus on your own Financial Objectives.
  • Accumulate in stages
  • Ensure a Diversified Portfolio!

 

17:58 Outro

Note: The above analysis are my own personal views and are NOT buy or sell recommendations. Investors who would like to leverage my extensive research and years of Singapore REIT investing experience can approach me separately for a REIT Portfolio Consultation.

 

Listen to his previous market outlook interviews here:

2022

2021

2020

Kenny Loh is an Associate Wealth Advisory Director and REITs Specialist of Singapore’s top Independent Financial Advisor. He helps clients construct diversified portfolios consisting of different asset classes from REITs, Equities, Bonds, ETFs, Unit Trusts, Private Equity, Alternative Investments, Digital Assets and Fixed Maturity Funds to achieve an optimal risk adjusted return. Kenny is also a CERTIFIED FINANCIAL PLANNER, SGX Academy REIT Trainer, Certified IBF Trainer of Associate REIT Investment Advisor (ARIA) and also invited speaker of REITs Symposium and Invest Fair.  

You can join my Telegram channel #REITirement – SREIT Singapore REIT Market Update and Retirement related news. https://t.me/REITirement

Continue ReadingMoney and Me: Is 2023 the year of recovery for S-REITs?