My last article covering CSOP S-REITs Leaders Index ETF was back in March 2022.
In this article, we’ll cover how the ETF has performed since then and also the house market outlook for 2H 2022.
Without overlapping too much of the same content as the previous article, I wanted to quickly reiterate the Unique Selling Points of CSOP S-REITs ETF:
- Tracks the performance of 28 large-mid cap Singapore REITs to offer investors stable dividends and a higher capital appreciation potential.
- Semi-annual rebalancing is based on the Daily Traded Velocity (>0.1%); highly traded REITs would take up more index weightage and vice versa.
- Offers investors passive exposure to the right sector relevant to the current economic conditions.
- Indicative yield of around 5.4%.
- Transparent cost as the ETF’s TER is capped at 0.6%.
CSOP S-REITs 1H Performance Review
S-REITs have been one of the better performers in 1H 2022 despite the concerns over the fragility of the world’s economy which leads often to a spike in market volatility.
From Apr 2016 to Jun 2022, S-REIT Leaders Index averaged an annualized total return of 7.8%^ and 90-day volatility of 11.5%^, outperforming global major REITs indexes. If we expand the time period horizon over the past 10 years, S-REITs leaders had an annualized total return at 8.3%^.
While the ETF has a negative 4.35% return so far this year, it is still one of the better performing assets this year as investors look for safe haven in the midst of volatility and rising interest rates environment.
A few of the industries’ performers this year have been related to the post-pandemic theme – with the likes of retail, hospitality and office returning close to the norm. Other sectors such as health care and data centre continue to be resilient in most parts of the year.
CSOP Market Outlook View for 2H 2022
If there is one thing that caught the world’s attention in 2022, it is inflation.
Inflation has been creeping up in the first half of 2022 in most developed countries in the world and is a major concern to the global economy.
While inflation is still a major concern for most people, CSOP believes that the worst of the tailwinds is behind us.
For example, the effects of increasing agricultural and food prices this year have rippled through the economy, forcing governments in many countries to impose price control and trade restrictions. While most of the increase is still due to seasonality and supply constraints, other factors such as higher energy prices, raw materials and geopolitical tension all play a factor in it.
However, things take a surprise reverse turn last month.
Major price indexes such as agriculture, metal, and crude oil moderate quite substantially in the past month, suggesting that we may have seen the peak in the 1H 2022.
On the credit risk side, rate transmission has also reversed and slowed down despite an increasing heightened risk environment, signalling that the risk of credit concerns is reducing and may have peaked.
My Personal Take On S-REITs
My own take on S-REITs is they will continue to remain in favor with most of the investors due to its favorable structure and regulations in the Singapore market.
One sector in the S-REIT universe which I particularly like is the hospitality sector as the industry is benefiting from a post-pandemic recovery of cross-border travel.
Below is a screenshot for Singapore hotel revenue per available room (RevPAR) in the last 30 months since the pandemic took place. You can see that hotel revenue per available room is close to returning to pre-pandemic level and we are still in a relatively early stage of the recovery, with most of China’s population still locked down in their own country.
I am also bullish on the Singapore office sector, particularly those with Grade A buildings.
As most workforce is returning back to office post-pandemic norm, with some preferring on a hybrid model, companies are sizing up their requirement for an office space for the next few years. This gives rise to less vacancy and higher demand, pushing rental rates higher for building landlords.
In any case, if you are confused on what sectors to buy, you can simply consider buying the REIT ETF.
If you are looking for an established sponsor, well diversified REITs, good scale and liquidity advantage, an increasing stable yield, higher potential of capital appreciation, you may consider this ETF as one of your next choices.
Disclaimer: This article is written in collaboration with CSOP AM.
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Thanks for the post. May I ask is the 8.3% return stated above inclusive of dividends?
Yes, it is inclusive of the dividend.