It is another painful week for equity investors all around the world.
For local investors, we witnessed the STI going below the 3000 points psychological support to close the week at 2972 points, 3% down from the previous week. This mirrored the S&P 500 index, which dropped 4%.
What was scarier to me was the volatility in the markets in the last two weeks. Higher volatility means higher risk because the valuation of our assets can reduce drastically overnight without warning. I could imagine that it would take a lot more courage for any new investors to part with their cash to invest in equity now.
Though the overall market was gloomy, for local income investors, things were looking ok on the dividend front.
Last week, I had a bumper crop of 20 companies on my watchlist reporting results and out of which, 15 declared dividends. Only 3 (or 20%) declared dividends below my expectations. This is definitely better than the 50% we saw the previous week.
Among these companies were many S-Reits’ Old Guards like Capitaland Mall, Suntec, Ascendas Reit, MapleTree Commercials, MapleTree Industrial, ParkwayLife and AA Reits. They continued to deliver the goods reliably and did not disappoint. If you are looking for Reits to invest, I would dare say that you can’t go very wrong with these few stalwarts.
Ascendas India Trust (AIT) provided the sweetest surprise with a dividend of 3.58 cents for the last 6 months. I don’t have a large holding of Ascendas India Trust as I have concerns of the Forex risk involved. So I wouldn’t benefit much. I will have to dig more to find out what caused the increase in their dividend. But investors seemed happy as the share price of AIT jumped the following day.
The smaller industrial Reits like Sabana and Cache continued to struggle this week, similar to Soilbuild Business Reit last week. Maybe there will be more consolidation in this sector especially if the market conditions continue to deteriorate.
The other market change that caught my attention was the sharp drop in the share price of our 3 local banks. Usually a higher interest rate environment will benefit the banks but I guess everyone is expecting recession round the corner with this trade war going on and hence, the appetite for more capital investments by companies (I.e. more loans for the banks) will be lower. Personally, I think the local banks are starting to look attractive, relative to their expected dividends. I went for some UOB shares last Friday. I would have bought DBS but I already have quite some position there. I hope an investment in UOB would pay off too.
Fast forward to next week, I am personally looking forward to the dividends from Starhill Global Reit. It has been a major dividend contributor to my kitty. I hope they will not spring a nasty surprise. Finger crossed.
Have a great investment week ahead.