Saizen REIT and Croesus Retail Trust: Much ado about Yen.

A reader sent me an email and expressed worry that the JPY might weaken further against the S$. With exposure to Saizen REIT and Croesus Retail Trust, he is worried.

For sure, the JPY has weakened dramatically in the last 2 years (and a few months) against the S$. By now, it has weakened some 25% or so. It might weaken further or it might not. I am sure there are arguments made in favour of both cases.

I think, as investors, we have to know clearly what is our motivation for investing in Saizen REIT and Croesus Retail Trust. If we are investing for income and if we have not overpaid in either case, I feel that we have little to worry about.

Luz Shinsaibashi, Osaka.

Both Saizen REIT and Croesus Retail Trust hedge exchange rate risk. So, even if the JPY were to weaken another 10% in the next six months, their next income distribution in S$ will barely be affected. Similarly, if the JPY were to appreciate significantly in the next six months, don't expect any big gain in DPU, everything else remaining equal.

Of course, the income distribution after the next could be hedged at an even lower exchange rate if the JPY is weaker by then. Yikes! Yes, this is one of the risks that comes with investing in anything that receives income in a foreign currency.

With Saizen REIT trading at 88c a unit and giving a DPU of about 6.5c, we are looking at a yield of 7.38%. Croesus Retail Trust is trading at about 89c and will offer an annualised DPU of about 9.3c, by my estimate, or a distribution yield of 10.44%, after its recent acquisitions. Double digit yield, anybody?

Of course, we have to remember that Saizen REIT has a much stronger balance sheet compared to Croesus Retail Trust and that they own different types of properties.

In the event that the JPY weakens another 5 or 10%, what would the impact be on the distributable income in S$ terms? Yield falls to 6.64% for Saizen REIT and to 9.45% for Croesus Retail Trust? Is that so unpalatable? Is that a catastrophe?

Photo of the Great Buddha in Kamakura I took on a trip in December 2011 when JPY was at its highest against the S$.

Investing for income is supposed to give us some measure of equanimity even if the equity market sails through a storm. If the slightest hint of choppy waters scares us to bits, we might want to look at our motivation for being invested again and also check to make sure that we have not invested with money we might need in the next few years.

There must be a reason for our fear. Find it.

Related posts:
1. Saizen REIT: Is the DPU sustainable?
2. Croesus Retail Trust: Recent acquisitions.
3. Motivations and methods in investing.
4. Be comfortable with being invested.

Invest in Japanese real estate: Saizen REIT and Croesus Retail Trust.

Over the weekend, I spoke with a friend who told me that his uncle is interested in investing in properties in Japan. Actually, he is not the first person to talk to me about the subject. Two other people spoke with me in the last 3 or 4 weeks expressing the same interest.

Ever since Prime Minister Shinzo Abe launched "Abenomics" in order to break the country out of vicious deflation which has lasted some 20 years, there has been renewed optimism that Japan could finally grow its economy once more. Although some might claim that Japan has joined USA and Europe in devaluing currencies, Japan has claimed that it is only bringing its currency down from an over valued position to a value that is more in sync with the current value of the US$.

Against the S$, the JPY has come down more than 20%. So, not only is Japan once again a less expensive destination for holiday seekers from Singapore, together with early signs of economic growth, it has also become a more attractive investment proposition.

Therefore, it should come as no surprise that some in Singapore should be looking at investing in Japanese real estate now. Indeed, anecdotal evidence shows that American and Chinese investors have already started doing so.

However, unless we have a lot of money and we have someone whom we can absolutely trust in Japan, I would caution against investing directly in Japanese real estate. It is complicated for foreigners to actually own a piece of real estate in Japan and we also do not have access to housing loans in the country. So, 100% cash down is required.

If we are really interested in investing in Japanese real estate, be it for rental income or possible capital appreciation, there are options right here in Singapore. Regular readers would have guessed the answer.

Off the top of my head, Saizen REIT is currently trading at about 20% discount to NAV even after the JPY has weakened so much against the S$. Gearing level has increased to 39%. At 18.7c a unit and a more conservative estimate of a 1c annual DPU due to the much weaker JPY, we are looking at a distribution yield of 5.35%. 

I do not think we can do better than this by directly buying an apartment in Japan without any leverage. The theoretical non-leveraged yield of Saizen REIT is about 3.85% and it is truly passive income compared to being a landlord of an apartment.

What about Croesus Retail Trust? It is now 96c a piece. Before the launch of "Abenomics", I was pessimistic about the retail sector and, consequently, shopping malls in Japan. In its 2011 report, Starhill Global REIT's  management said as much although not in the same words.

However, anecdotal evidence shows a revival in the Japanese retail sector since the launch of "Abenomics". As inflation returns to the Japanese economy, the people no longer defer purchases in the hope of lower prices in a deflationary environment. Consequently, this means brighter prospects for Japanese shopping malls.

At its IPO price of 93c a piece, it projected a distribution yield of 8%. However, the Trust's gearing level of 48% based on the appraised value of its properties is much higher than Saizen REIT's current gearing. Of course, gearing will magnify gains. Nonetheless, the theoretical non-leveraged yield of Croesus Retail Trust is 5.41%.

With a brighter outlook for the Japanese economy and retail sector, Croesus Retail Trust is beginning to look attractive as an investment for income.

In conclusion, with Japan's fortunes seemingly turning up, there will be an increasing level of interest in investing in Japan and real estate will be a natural consideration. We don't have to look too far to benefit from the improving fortunes of the country.

Related posts:
1. Croesus Retail Trust
2. Saizen REIT: Refinancing.

"REITs that buy apartments benefited from a shortage of new supply and a stable number of tenants in a nation where less than half of Japanese under the age of 40 own their own home. Japan has accelerated efforts under Prime Minister Shinzo Abe to end deflation and boost the world’s third-largest economy, including measures to revive the property industry, which has been struggling since an asset bubble burst two decades ago. The government has a target to increase assets owned by REITs by 40 percent by 2020. "
(Source: Japan Apartment Real Estate Proving Best: Riskless Return)

$3.30 Fillet-O-Fish meal and $8.00 QB House haircut.

In fact, you could get a Fillet-O-Fish or a Big Mac or a 6 piece McNugget value meal for S$3.30 each! Where in Singapore?

Unfortunately, not in Singapore but in Hong Kong.

Cheap!

When QB House increased their price from S$10 to S$12 here, I was taken aback. That was a 20% increase in price! Anyway, I soon got over it until I saw this:

Cheap!

HK$50 which is about S$8 only!

What did I do? Got myself a haircut and felt quite smug about it. Used the S$4 saved to buy myself a Fillet-O-Fish value meal and I still had 70c left over! Smug City!

Yummy!

We really have to travel to feel how strong the S$ is now and how expensive things have become in our country.

With the S$ so strong, is there more that can be done to reduce the cost of living in Singapore? I wonder.

Related posts:
1. Hong Kong: Ibis Hotel revisited.
2. Save money with low prices and free shipping.

S-REITs: Are we asking the right questions? (UPDATED)

A friend asked me if S-REITs are bad investments now? Why are people selling down S-REITs? 

He is somewhat concerned about his investments in S-REITs and was hoping that I will tell him what to do, I guess.

Well, I cannot and will not tell him what to do. He has to decide for himself. 

Before he can decide for himself, he has to understand his motivations for being invested in S-REITs in the first instance.





If his motivation was for income, then, ask if S-REITs still do a good job of providing regular income. 

If his motivation was for capital gain, then, he should have set a target and perhaps sold his investments when prices declined by 10% from the top, for example.

People get confused when they don't know what they want.

For me, my remaining investment in S-REITs is for income. 

Apart from Saizen REIT which could see income distribution in S$ affected by the much weaker JPY, I do not see income being affected negatively in the other S-REITs I am vested in. 

Well, at least not in the next few quarters.







So, why are people selling down S-REITs? 

There are many explanations and there has been much said about how sensitive S-REITs are to interest rates. 

An increase in interest rates will be bad for S-REITs in more ways than one. 

This is all true. 

However, we have to question also if an increase in interest rate is imminent and also if S-REITs will be immediately affected. 

Personally, I do not think so.





Of course, Mr. Market does not care what I think. This is a good thing. 

As Mr. Market goes into a manic depression, he is going to offer S-REITs at lower and lower prices. 

This means distribution yields will go higher and higher, everything else remaining equal.

Could we see S-REITs trading below NAVs once again? I have no idea but it could happen. 





If it should happen, we would have a chance to buy productive real estate at a discount once again. Guess what would I do then?

As S-REITs' unit prices climbed higher, I warned that we should be careful and not be too optimistic. 

Now, as S-REITs' unit prices decline, I will remind everyone not to be too pessimistic.

Always ask the right questions and we will know what to do.






Related posts:
1. Wealth creation in the stock market.
2. Never lose money in S-REITs?
3. Be cautious when climbing the S-REIT tree.

Saizen REIT: A brief break through.

Saizen REIT had a high volume, white candle day. Could it be that Mr. Market is more than warming up to this once upon a time unloved REIT? It certainly looks that way.

Draw some Fibo lines and we see why 21c was a strong resistance today. With volume as high as today's, however, it would be natural for any chartist to wonder if there could be a follow through in the next session.

Of course, the very long upper wick on the candle suggests the presence of very strong selling pressure as unit price tried to push higher. Look at the CMF and we see a lower high and a lower low which suggest to me that money was flowing out of the counter as price pushed higher. This could limit upside in the short term.

Fundamentally, the NAV/unit of Saizen REIT as well as its DPU in S$ terms could reduce somewhat due to the weaker JPY. Against the S$, the JPY has weakened some 20% in the last one year. So, it would not be wrong to expect lower distribution yields, all else remaining equal.

However, Saizen REIT has been on an acquisition path and this would mitigate any reduction in NAV/unit as well as DPU in S$ terms. Indeed, unit holders would have been very pleased when a higher half yearly DPU of 0.66c was paid out recently. That was a bit higher than the DPU six months earlier.

On 31 December 2012, the REIT's NAV/unit was JPY 19.21.  Based on the exchange rate of S$13.30 to JPY 1,000 today, NAV/unit works out to be S$0.255. So, at 20c a unit, Saizen REIT is still trading at a discount to NAV. Almost 22%, actually.

If units of Saizen REIT should trade at S$0.25, with an annualised DPU of 1.32c, we are looking at a distribution yield of 5.28%. For a portfolio of freehold residential properties in Japan which has seen a consistent occupancy rate of above 90%, is this good enough for Mr. Market?

There are really no comparable REITs listed in Singapore and we have to look at J-REITs to get a clue as to why Saizen REIT could look very attractive even at today's price. J-REITs' average distribution yield is just slightly above 4% now. So, at 20c a unit and with an annualised DPU of 1.32c, the 6.6% distribution yield from Saizen REIT looks extremely attractive.

With an aggressive Bank of Japan bent on their own brand of quantitative easing (QE), we could see the Land of the Rising Sun experiencing rising prices again. So, we could see Saizen REIT's portfolio of properties being valued higher in JPY terms over time. This could bump up NAV/unit in S$ terms.

However, if we look at the experience of the USA, it could take years and more than one QE before we see positive results. So, any optimism in the short term should be tempered but the longer term picture is very promising.

If Mr. Market is ready to accept a lower distribution yield of 5.5% from the REIT and 5.5% is still much higher than comparable J-REITs' distribution yields, then, we could see unit price trading higher at 24c in time to come, everything else remaining equal.

So, is Saizen REIT still undervalued now? Yes, even now, I believe that it is.

Technically, however, selling pressure was very strong as unit price tried to push past 21c. CMF shows an increase in the outflow of money from the REIT as unit price moved higher today. So, if you took some gains off the table today, I think it was a great idea. Just make sure to get back in at supports if given a chance.

Related posts:
1. Saizen REIT: Still a buy?
2. Saizen REIT: DPU 0.66c.

Ascendas Hospitality Trust: Am I interested?

Over the weekend, a friend asked me if I would be interested in Ascendas Hospitality Trust although he knew that I am generally not interested in IPOs. He was just asking for my thoughts on the Trust.

Ariake Sunroute Hotel, Japan.

Ascendas Hospitality Trust (A-HTrust) will be offering 437.33 million stapled securities at 88 cents each for mainboard listing in its initial public offer (IPO) in Singapore.

(Source: The Business Times, 18 July 2012)

What are stapled securities?

Stapling simply means that two different securities are "stapled" together for the purposes of trading or transfers. Stapled security could comprise two or more of the same or legally different instruments, for example, a share in a company and a unit in a trust.

The trust(s) and the company(ies) can hold assets and operate businesses, but active business, such as asset management and development are typically conducted by the company while passive investments in property or funds are undertaken by the trust. In practice, the trust and the company effectively operate as one entity although the company continues to be a separate legal entity from the trust.

Source: http://www.invested.hk/invested/en/html/section/index.html

For example:

CDL Hospitality Trusts is a stapled group comprising CDL Hospitality Real Estate Investment Trust ("H-REIT"), a real estate investment trust, and CDL Hospitality Business Trust ("HBT"), a business trust.

Well, what do I think of Ascendas Hospitality Trust? I won't do a thorough analysis of the Trust because I don't really have the inclination although I will share why I am not interested in it (now).

ibis Beijing Sanyuan Hotel.

Initially, the Trust will hold 10 hotels in its portfolio. These hotels are in the countries of China, Australia and Japan with Australia contributing to some three quarters of its income. The Trust also projects an 8% distribution yield in the year 2014.

I feel that I need to be conversant in the economies of three countries and the health of their respective tourism sectors to analyse how well they could continue doing. I would also need to take into consideration that income would be collected in three foreign currencies and converted to S$ for distribution to unitholders. Foreign exchange rates would affect income in S$ terms.

So, analysing this Trust and forecasting its future income is somewhat more challenging. It is less straightforward.

Then, what about my investment in Saizen REIT? Isn't that Japanese?

I won't say that I am conversant with the Japanese economy or its housing sector but I am a bit better informed in the area. Also, it is one country, not three and I only have to look at a pair of currencies, not three.

Saizen REIT is also holding residential properties, not hotels. Demand for housing is more inelastic compared to demand for hotels and with the type of properties Saizen REIT owns, there is lesser correlation with the ups and downs of the economy. Demand for hotels, however, is very different.

Ascendas Hospitality Trust is going to demand a lot of time and effort from me if I were to be become a unitholder. An eventual 8% distribution yield? I will need a higher distribution yield to entice me into this one in view of the work I have to do.

Money continues to flow into Singapore.

Singapore continues to attract inflows of money. I have friends from USA and Europe who are parking their money in savings accounts in Singapore although they get only 0.1% interest. Why? The Singapore Dollar has been appreciating against their home currencies and is likely to get stronger.

Singapore also has a AAA rating when it comes to sovereign bonds. This has been attracting much attention. The latest to announce intention to invest in Singapore bonds is Schroder Investment.

Does it stop at bank deposits and bonds? Emphatically, no. Hot money is hungry for productive assets in Singapore. The rising supply of money has kept interest rates low, creating a credit boom. This is a big reason why prices of condominiums, especially those in the luxury segment, have shot through the roof in recent times.

The last I heard, some people with a lot of money have turned their attention to industrial properties in Singapore as yields on residential properties are relatively low at about 4% now. Will industrial properties see their prices pushed up next?

The rising value of the Singapore Dollar and continuing inflow of money into our country has created problems for our industries as well because our exports become less competitive. As it is, our GDP shrank 7.8% in the last quarter.

I believe that the Monetary Authority of Singapore has to limit hot money inflows or cap gains on the Singapore Dollar and soon.

Singapore bonds attract Schroder with Asia’s sole AAA ratings
Thursday, 25 August 2011

© 2011 - The Edge Singapore

Dr. Marc Faber: How not to lose money?

I have the greatest respect for Dr. Marc Faber and his insights have so far been spot on. In a recent interview, he said "I am ultra-bearish about everything geopolitically. In an environment of money printing, we have to ask ourselves, how do we protect our wealth? ... Where do we allocate the money?"

In summary:

1. Treasuries:

"U.S. government bonds are junk bonds," Faber said. "As long as they can print, they can pay the interest. But another way to default is to pay the interest and principal in depreciating currency." (AK71: Yup, countries inflating their way out of hard times has been done before.)

2.  Cash:

Specifically, the problem in Faber's view is the loss of purchasing power as inflation whittles away the value of money. (AK71: I believe he is referring more to the US$ and also the Euro. The S$ has been strengthening and we are still seeing inflationary pressures but it would be much worse for the US$ and the Euro.)

3. Stocks:

If you print money, stocks will not collapse. (AK71: I am sticking to my plan like glue! Remember my plan?)

4. Emerging markets:

Faber's own stock portfolio is centered on dividend-paying Asian shares, particularly in Malaysia, Singapore, Thailand and Hong Kong. These include a variety of real estate investment trusts and utilities. (AK71: Honestly, I knew that he was a fellow investor in Hyflux Water Trust but I did not know that he is also into REITs! I like this. Stick to the plan!)

5. Gold:

Faber is convinced that the price of gold will continue rising and that any pullback is a buying opportunity. And as a currency, Faber said gold should be held in its physical form and not in shares of gold miners or even exchange-traded funds. (AK71: I have recently replied to a reader that I feel that I am underinvested in gold and silver. However, being in Singapore and having S$ denominated assets, I feel much safer.)

Read complete article here.

Related post:
1. Sleep well at night with a plan.
2. Hedging and precious metals.
3. Hyflux Water Trust: Privatisation.
4. Staying positive on S-REITs.

Tea with AK71: Interest rates and inflation.

A topic on interest rates seems serious enough. Why have I put it under "Tea with AK71"? Well, it is because I want to talk about it in a more informal tone. It gives me an excuse to ramble and not be too careful in the way I write.

In the last one year, many have been talking about interest rates and how the low interest rates won't last and would go up in time. It seems to be a relatively safe prediction and, in general, I agree but when would it go up and by how much? That's the difficult question.

What goes up must come down one day and what is down would go up too. It is how things in the world achieve equilibrium. There could be exceptions but let's ignore these to keep this chat going.

I might have mentioned this in my blog before. I cannot remember. Think of China and what they are doing. They have increased interest rate more than once in the last few months due to inflationary pressures. Is increasing interest rates the only way to fight inflation? Well, there are many tools available and interest rate is just one tool. Like all tools, it has its limitations.

China has also increased bank reserves requirement in an attempt to reduce money supply. Interest rate and money supply are useful to a point in controlling inflation which are domestically created. They have little impact on exogenous factors.

The Chinese have a huge problem with inflation and much of that is imported. Remember that only a third of the Chinese economy is driven by domestic consumption. This is very different from Indonesia's 60%. How much of the inflationary pressure in China is due to rampant domestic over-consumption, therefore?

Raising interest rates won't help much and could make things worse. The more effective way to reign in inflation is what the Singapore government did: allow its currency to appreciate. Singapore too has a small domestic economy. The Chinese know that they have to let the RMB appreciate and they are just delaying the move.

The RMB is way undervalued and it is the main culprit in causing rampart inflation in China as the booming Chinese economy is heavily reliant on many imports just to keep its industries humming along. Its energy needs is just one such example.

The Singapore government does not use interest rate to control inflation. It uses the Singapore Dollar which floats against a basket of currencies of its major trading partners. If the MAS should hike interest rates (which it can't) to combat inflation, it could have a bigger problem on hand. Why?

Many Asian countries already have a problem of hot money flowing in, money looking for better returns. This money is usually from developed countries which are doing quantitative easing in the hope of jump starting or keeping their economy above water. In these countries, interest rates are more likely than not close to zero.

Money will go to where it is treated best and so, although the interest rates are pretty low in Singapore, a lot of money still find its way to our small island. For example, a 0.8% interest rate plus the prospect of  a 5% appreciation against its country of origin is very attractive for such funds.

The inflows have to be put to productive use and lenders (banks) will mostly offer relatively low interest rates to entice borrowers. More cheap debt and inflation continues. So, combating inflation is not a simple matter of increasing interest rates. If only it was that simple.

Now, one day, when the Chinese government decides to float the RMB more realistically, what would happen to companies with investments in the PRC? What would happen to CapitaMalls Asia?

Another point, since the Singapore government does not use interest rate to control inflation and if an increase in interest rate could be a bad thing instead as it encourages more hot money inflow, what would be the interest rates be like in Singapore for the next 12 months?

To both sets of questions, I have answers. However, seeing that my formal education in Economics ceased at "A" Levels, I shall not reveal what I think. I could be wrong, of course.

I think I need something bracing after this heavy blogging. Tieh Kuan Yin, anybody?

Email exchange with a reader on some REITs.

I have been receiving more emails from readers in the last few weeks. Although I try to answer all of them in a timely manner, it might get harder to do so in time. So, apologies in advance for late replies.  

Having said this, certain emails posed questions to which the answers could be found in my blog. Just use the Search function at the top of my blog and chances are you would find the answers. Thanks for helping me to help you. :-)

Here are some bits from an email exchange I had with a reader recently on certain REITs which might be of interest to some of us:

Reader (R): 

I was wondering about Saizen, with the price at 16.5c now.. is it still feasable to enter or is it too high? 

AK:

Saizen REIT? Well, at 16.5c, I am still not a seller but I am not a buyer too as I am already vested. If I were not vested in the REIT now and if I am happy with a 6.5% yield on freehold Japanese properties, I would buy some first. That's just me. Disclaimer applies.

R:

Hey ak very sorry i have so many questions :) May i know how the 6.5% yield for saizen reit is calculated? Thanks. Appreciate it.

AK: 

See this blog post for details:
http://singaporeanstocksinvestor.blogspot.com/2010/11/saizen-reit-1q-fy2011-results.html

R:

Hey thx!! Yea saizen would be more affordable for me than first REIT.. Which is stronger from ur point of view? Thx :)

AK:

Stronger? Hmm.. They are in two different sectors and countries. Cannot compare. They have different benefits and risks.

R:

Also, Another small question would be, do you think that the jpy/sgd exchange rate will affect the earning numbers for saizen reit in the near future?

AK:

I expect the JPY to stay strong against major currencies in the near future. Over a longer period, it is harder to say. Stay nimble.

R:

I see, i agree with that, lets say i have 10k investable assets atm how much would u say i put into reit?

how much of each reit do you own? Im really interested in Saizen and Aims but im not too sure which would be better.

AK: 

If you have $10k in cash and it is money you do not need in the next few years, you could consider putting all of it into REITs if you are after a regular income.

Saizen REIT is my largest investment although its distribution yield is estimated at only 6.5%. This is because I think the Japanese real estate market has limited downside from here and things would get better very soon.

It is also because the properties are freehold in nature. So, they are perpetual income generators. Once the last CMBS is refinanced, it would probably lead to an upgrade by rating agencies and we could see some capital appreciation too. It should trade at a 5% distribution yield in line with most REITs in Japan which means there could be a 20% upside in unit price.

AIMS AMP Capital Industrial REIT is my second largest investment. Its forecast DPU for 2011 is 2.08c.  At the current unit price of 22.5c, distribution yield is a nice 9.24%. This could possibly explain partially the recent buying interest. Many pension funds are invested in this REIT. These are long term investors and provide stability to the REIT's price. 

However, we have to remember that the REIT is invested in relatively short term leasehold properties in Singapore (where most industrial properties have land leases of 30 years). The REIT has to continually renew its leases but this could take the form of acquisitions to keep the average lease of its portfolio healthy. More fund raising? Yes, I think so. 

So, the yield of 9.24% is not real and we have to give some of that back. However, comparing apples with apples, if Sabana REIT is able to price its IPO at $1.05/unit which means a yield of 8% or so, we could see AIMS trading closer to an 8% yield eventually and this means there could be a 10% upside in price.

I would not put all my money in a single REIT or in any one single company. That is risky. You have to decide how much you would put in each. Good luck.

Japanese Yen at 15 year high.

I have been following news reporting on the strength of the Japanese Yen as well as the actions taken by Prime Minister Naoto Kan's team.  I am, naturally, very interested in economic and financial news from the Land of the Rising Sun as I am vested in Saizen REIT.

I applaud Bank of Japan's (BOJ) decision to cut its interest rate to zero recently.  This would, in theory, make credit cheaper and more readily available in the country. This would encourage borrowing and could possibly give the economy a shot in the arm. However, taking note that the interest rate was near zero to begin with (at 0.1%), cutting its rate to zero could have limited positive effects.

For investors in Saizen REIT, a strong Yen is good because we receive income distributions in S$. However, a strong Yen is not good for Japan as, being an exporting economy, a strong Yen reduces Japanese companies' competitiveness. As Japanese MNCs repatriate earnings back to Japan, a stronger Yen reduces the value of repatriated earnings. A stronger Yen could also propagate the deflationary spiral which Japan is suffering from.

While, as investors in Saizen REIT, we want to have a strong Japanese Yen, we want it strong enough to give us good returns (i.e. an attractive yield on our investment) but we do not want it so strong as to jeopardise the well being of the Japanese economy as that would, in time, have negative ramifications for Japanese residential real estate.

Latest update:
The dollar was trading at 82.36 yen in Tokyo midday.
08 October 2010 1231 hrs, CNA.

Related post:
Japan's debt issue and Saizen REIT.

Increasing demand for S-REITs.

Morgan Stanley says that S-REITs will benefit from low borrowing costs and a stronger S$. The high dividend yields make S-REITs attractive with limited downside.

Singapore’s high-yield REITs attractive. Yield spreads for REITs will remain high while interest rates are low, meaning cheaper funding costs for the trusts, Morgan Stanley says
Monday, 04 October 2010

© 2010 - The Edge Singapore

Although Morgan Stanley specifically mentioned Mapletree Logistics Trust and Ascott Residence Trust as being upgraded to Overweight, I believe that smaller S-REITs with even higher yields will get some attention soon as well. It is a matter of time and I will be patient.

Today, Saizen REIT saw its 15.5c sell queue bought up to the tune of 6,068 lots. There were three trades which were buy ups of 1,000 lots each. Could this REIT be attracting the interest of some deep pocketed investors?

Incidentally, I have accepted and paid for the rights of AIMS AMP Capital Industrial REIT this evening. I also applied for some excess rights.  Hope I get some. To fellow unitholders, please remember that the deadline is 7 Oct (Thu), 9.30pm for applications by ATM.

Related posts:
Office S-REITs VS Industrial S-REITs.
AIMS AMP Capital Industrial Trust: Rights issue.
Saizen REIT: Better than expected DPU.

Charts in brief: 3 Jun 10.

Singapore dollar to outperform on ‘safe-haven’ status, RBS says
Thursday, 03 June 2010

© 2010 - The Edge Singapore

STI climbs 2.4% to 2,793.34 at closing
Thursday, 03 June 2010

© 2010 - The Edge Singapore

AIMS AMP Capital Industrial REIT: There is no doubt now that this counter has cleared a major resistance provided by a cluster of MAs. Closing at 22.5c today increased the probability of a retest of 23c, a long term resistance.  Would it stay range bound with 23c as the upper end of the range? The MACD is rising strongly and looks set to cross into positive territory which would signal the return of positive momentum. MFI is rising and OBV is rising.  The momentum seems strong.

FSL Trust:  Volume expanded nicely today on a white candle day.  The declining 20dMA is growing gentler in its gradient.  MACD continues to pull away upwards from the signal line in negative territory. MFI formed a higher low as it moves to test 50% again.  OBV is rising. The Bollinger bands are narrowing which suggests a reduction in volatility. 46c remains the resistance to watch for now. The declining 20dMA is at 47c.  Clearing these resistance levels could possibly see a target of 51.5c.

Golden Agriculture: Price touched a high of 52c after overcoming resistance at 50.5c. 52c, incidentally, is also where we find the declining 20dMA.  I have sold my remaining shares in this company at 51c. The negative divergence between rising price and falling volume is quite clear.  The downtrend is still intact and this rebound has provided me with an opportunity to divest.

SPH: Very nice white candle day but the volume has declined. Negative divergence.  Not so nice. MACD is poised for a bullish crossover in negative territory.  MFI has formed a higher low but OBV is flattish.  Closing at $3.79 is where we find the 20dMA.  Breaking this resistance, I believe, will find resistance at $3.83 next as this is where we find the 150% Fibo line as well as the 100dMA. Breaking this level would find resistance higher up at $3.88 and $3.90. Without an expansion in volume as price moves higher, I am doubtful that the higher resistance levels could be taken out and would therefore sell into strength.

Related posts:
FSL Trust: Time to buy?
AIMS AMP Capital Industrial REIT: A strong up day.
SPH: Flirting with the 200dMA.
Golden Agriculture: Downtrend is intact.

Gold as an insurance against inflation

Why buy gold? For me, gold is just another form of insurance against inflation. Real assets such as crude oil, Asian real estate and commodities are also used to hedge against inflation.

Gold will hit US$2.5k eventually and, probably, go higher in the years to come. The current inflation adjusted value of gold compared to the high achieved in 1980 should be about US$2.4k now. We are about halfway there. If we believe that inflation is going to be a big issue in the coming years, it's a no brainer that gold is on a long term uptrend. Real value of gold

However, I'm not overzealous about gold because I am not living in the USA or HK, making US$ or HK$. I am living in Singapore and making S$ which will appreciate against US$ and HK$ in time. This makes gold investment less compelling for me.

Frankly, I still prefer trading in the stockmarket and buying undervalued and/or strong dividend paying stocks for now. My gains in the stockmarket so far this year have outperformed gold or silver. Cashflow is also something I get from my stockmarket investments that I do not get from gold. However, all parties will come to an end. Will have to know when to exit the stockmarket.