03/2021
The sharp rise in 10-year and 30-year US Treasuries from late-Feb 2021 to the highest levels in under a year triggered a major sell off in capital and equity markets in the past 3 weeks. The tech-heavy NASDAQ sold off close to a 10% correction by Mon 8 Mar 2021 while the local FTSE STI Index, ever sensitive to rising interest rates, corrected a woeful 10.71% to 2,539.28 in 2 months 8 days. Surprisingly, the FTSE REIT Index, generally more interest-rate sensitive than the FTSE STI Index, only corrected by 4.42% to 817.75 points.
At GCP Global, our investor students which span more than 8,000 globally had seen this correction coming as –
STEEPENING YIELD CURVE
We have always taught that rising interest rates have always been the antithesis of rising capital and equity markets. They often, are the cause for market corrections, barring market crisis periods which are normally caused by black swan events. In this correction, it was easy to prepare one’s investment portfolio as -
1. US 10-year Treasuries doubled from 0.66% to 1.615% in just 6 months
2. Essentially, they have surged from 0.9% to 1.1615% in just 2 months 8 days since the turn of the year.
3. Compare the current surge in US Treasuries to the previous 2 in the last decade. The first happened in the summer of 2012 when US 10-year shot up from 1.4% to 3% the falls of 2013. This was a 150 basis points increase over 11 months compared to the current 100 basis points increase over less than 11 months. In 2013, the rise in US Treasuries led to the Bernanke Taper Tandrum sell-off which saw REITs and equity bottom by 2Q2013. This took place over 11 months as seen in the red circle as shown in the graph above.
4. Then next episode was when US 10-year shot up again from 1.3% in 2016 to 3.2% in late 2018 as shown in the orange circle. Once again, this was a 170 basis points increase over 25 months compared to the current 100 basis points increase over less than 11 months. The impact on equities and REITs were actually quite muted as 2016 and 2017 ended positive. It was only in 2018 when the Fed embarked on 3 interest rates increases of 25 bp each that equities and REITs suffered corrections. Yet, the 2018 correction was one of the most muted in the last decade.
IMPACT ON S-REITs
S-REITs lost 9.1% for the whole year 2018 while the STI lost 9.7%. The biggest losers for REITs in 2018 were the names we mentioned in Quarterly investment class to AVOID. The notable good REITs in the Top 10 losers were Suntec and CapitaLand Retail China which lost 17% and 16% respectively for the whole year.
So how did the Top 10 Best REITs perform for 2018?
All our favorite names that we taught in class were in the Top 10 minus AIMPS AMPI REIT. Yes, there were only 2 REITs that posted POSITIVE returns in 2018, but among the top 10 performing REITs, the losses were all contained with the 5% loss range.
CURRENT CORRECTION ON IMPACTED REITS
MIT and MLT have been the worst HIT REITs down 11% and 10% respectively this time round. We have informed our GCP Global students to STAY AWAY from recent REIT private placements which we have warned that either the pricing was too expensive or that the discount was too small, notwithstanding the good quality of the REITs and their favorable new acquisitions. These include –
Only 1 REIT, namely FCT have posted positive gains from the private placement price. The other investors who took up the institutional private placements in MIT, MLT and Ascendas REIT are still nursing losses. Note that institutional private placements are normally bought by “learned investors” like the institutional funds, index funds, family offices and sophisticated High Net worth investors. In our investment classes, we have always taught that notwithstanding the good quality of the REITs and their favorable new acquisitions, the perspicacious investor should always look out for the pricing that are either too expensive, profit margins too tight or that the discount is too small.
LEARNING POINTS
Yes, history has taught me that if US 10-year do not increase sharply in a short period of time, impact on equities and REITs are limited. But if they shoot up too sharp in too short a period of time, market distortion is bound to happen, as we continue to extort in our classes.
We have written extensively on how to prepare and navigate market corrections, do check out past warnings before they happened.
So, is US 10-year Treasuries heading to the 2 – 2.5% level this year?
What will be the further impact on Technology stocks?
What will be the further impact on S-REITs?
How does the sagacious investor prepare one’s investment portfolio for such eventuality?
Do join us on Sat 10 Apr 2021 for our next investment class as we guide you through this upheaval. Sign up HERE to enjoy the Early Bird Discount. Join us as we help you to navigate the above questions which will have severe ramifications in your investment portfolio performance.
Do join us for our Special GCP Global REITainment event via Facebook Live on Thu 18 Mar 2021 @ 8 pm. We have the honor and privilege of having ESR-REIT as our Official Sponsor and Community Foundation of Singapore as our Official Partner for our Charity Book Giveaway It will be an exciting evening of Q&As of getting to know your REITs well and more importantly, to position into the winning ones. Get the answers right and you stand get to win a copy of our Times Top 10 Bestseller book “Making Your Millions in REITs”. As my book have shown, REITs have shown that if you invest well, invest timely, you can make millions.
GCP GLOBAL RECOGNISED AS ASIA’S FOREMOST EDUCATOR IN REITS IN THE SINGAPORE CORPORATE AWARDS 2019
OUR LATEST MEDIA INTERVIEW ON REITS, TECHNOLOGY & DISRUPTOR INNOVATORS –
1. Money and Me: Impact of Metro Holdings exit of its department store business, S-REITS, Silver's trading, Tech and Gaming Stocks in China and Alibaba - 3 Feb 2021, Money FM89.3
2. Prescient Timing in Tech Stocks for Multifold Returns – 29 Jan 2021, Biz Tech Asia
https://fb.watch/3_G9NsiPy-/
3. Wise Investor Cracks the REIT Myth – 21 Dec 2020, LianHe Zaobao
4. Reality Bites for REITs – Our Live Session with Mr. Adrian Chui, ED & CEO, ESR Funds Management – 17 Dec 2020, GCP Global Live
5. Sizing up the epic Sabana, ESR-REIT showdown and riding high on Electric Vehicle, EV stocks – 11 Nov 2020, Business Tech Asia
REITS FOR A GOOD CAUSE
GCP Global students donate to help Covid-19 victims
OUR PARTNERSHIP WITH MONEY FM89.3 IN ITS MAIDEN LAUNCH OF MONEY MATTERS https://www.facebook.com/352565835119256/posts/1126789454363553/
OUR LATEST PUBLICATIONS -
1. WHERE & HOW to make your next Million in the Year of the Ox
2. 7th Year Itch for S-REITs and its severe ramifications for the REIT investor
https://gcpglobalsg.wixsite.com/gcpglobal/post/7th-seven-year-itch-for-s-reits-its-severe-ramifications
3. “I Made a Mistake” – Best Advise for the Sagacious REIT investor
4. Tripling Your Money with Global Tech stocks
5. The Ability to Deliver DPU growth is the Key in S-REITs superior performance in 2020
https://gcpglobalsg.wixsite.com/gcpglobal/post/the-ability-to-deliver-dpu-growth-is-the-key-in-s-reits-superior-performance-2020
Komentari