SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Equity Bottom-Up

CapitaLand Ascendas REIT / Equity Bottom-Up





Keppel DC REIT, Mapletree Logistics Trust &amp; Parkway Life REIT have generated gains in the 2020 YTD, leading the overall S-REIT Sector which has averaged a 22% decline over the period, with an average 38% decline to 23 March, and an average 28% gain from 23 March to 27 April.  
	 
	
Keppel DC REIT, Mapletree Logistics Trust &amp; Parkway Life REIT are also amongst the 22 S-REITs that report more than a third of their revenue to Singapore. Of the 22 S-REITs, 14 have been listed for the past 10 years with average annualised total returns of 7%.   
	 
	
In line with its capital recycling strategy and in order to realise profits that can be redeployed to capture new opportunities, Keppel T&amp;T has entered into a Sale and Purchase Agreement with a placement agent for the sale of 38 million units in Keppel DC REIT at S$2.42 per Sale Unit. 


 

With a combined market value of S$90 billion, S-REITs make up 11% of the market capitalisation of all stocks in Singapore. Growing investor participation in recent years has seen REITs contributing 29% of daily turnover in the 2020 year to 27 April.

The majority of the S-REIT market capitalisation and S$425 million in average daily turnover in the 2020 year to 27 April is made up of the 22 REITs or Stapled Trusts that report at least one-third of their revenue to Singapore.



      
    
    Revenue Exposure

There has been less distinction in the 2020 year-to-date total returns, with the 22 S-REITs that report more than a third of their revenue to Singapore seeing similar swings as the S-REITs that report less than a third to none of their revenue to Singapore. As illustrated below, the two genres of S-REITs saw similar declines in the 2020 year through to 23 March, and similar partial recoveries from 23 March to 27 April.


      
    
    Reits Revenue


For a more detailed breakdown of the S-REIT Sector, investors can refer to the SREIT &amp; Property Trusts Chartbook - April 2020 here.  

Trio of REITs that have Lodged Gains in 2020 YTD

The 22 S-REITs that report more than a third of their revenue to Singapore included the three strongest S-REITs in the 2020 year through to 27 April that bucked the global trend of declines.

Keppel DC REIT generated a 22.2% total return in the 2020 year through to 27 April, with Mapletree Logistics Trust (“MLT”) gaining 4.2% and Parkway Life REIT (“PLIFE REIT”) gaining 0.9%. Both Keppel DC REIT and MLT were amongst the three S-REITs that saw the highest net institutional inflows over the 17 weeks.

Keppel T&amp;T Realising Profits in Keppel DC REIT

In its 1QFY20 Key Business and Operational Update (click here), Keppel DC REIT reported its 1QFY20 (ended 31 Mar)  gross revenue rose 25.5% from 1QFY19.

Prior to the 28 April session, Keppel Corporation announced that Keppel Telecommunications &amp; Transportation (“Keppel T&amp;T”), through its indirect wholly-owned subsidiary, Keppel DC Investment Holdings had on 27 April 2020 entered into a sale and purchase agreement with Credit Suisse (Singapore) Limited as the placement agent for the sale of 38 million units in Keppel DC REIT.

These sales units represent approximately 2.33% of the total issued units in Keppel DC REIT, with a consideration of S$2.42 per sale unit. In line with the Group’s capital recycling strategy, the sale allows Keppel T&amp;T to realise profits that can be redeployed to capture new opportunities. As maintained in the announcement (click here) Keppel T&amp;T continues to be the single largest unitholder of Keppel DC REIT with a unitholding of 20.58%

Mapletree Logisitics Trust Performance Underpinned by Stable Operations &amp; Accretive Acquisition

On 23 April, MLT reported its FY19/20 (ended 31 Mar) DPU rose 2.5% from FY18/19 to 8.142 cents. The Managers of MLT maintained that currently most of its tenants across its eight markets are operational: In MLT’s top three core markets, for Hong Kong SAR ;and Japan, all tenants remain fully operational, while for Singapore about 5% of its tenant base is impacted.  The Managers added that there are strict government measures in certain markets, its tenants’ operations have remained largely intact:


Overall, tenants from the retail, hospitality and travel industries, which account for about 10% of MLT’s revenue, are the hardest hit by COVID-19; while
	Tenants who serve essential daily needs, such as food and beverage products, consumer staples and healthcare, continue to see healthy levels of activity, especially for the ecommerce operators. These sectors account for over 30% of MLT’s revenue.

For more details click here.

PLife REIT Reported Stable Performance Amidst COVID-19 Outbreak in 1Q20 

On 22 April, PLife REIT reported its DPU in 1QFY20 (ended 31 Mar) grew by 1.4% to 3.32 Singapore cents, from 3.28 Singapore cents in 1QFY19. Gross revenue rose 5.2% year-on-year (“Y-O-Y”) to S$29.9 million in 1Q 2020. Growth was largely attributed to additional revenue contribution from the three Japan properties acquired in 4QFY19, upward revision of the minimum guaranteed rent for Singapore hospitals by 1.61% as well as the appreciation of Japanese Yen (“JPY”). The Group also noted it is setting aside S$1.7 million to provide targeted assistance and support measures for affected tenants as needed. As part of PLife REIT’s ongoing efforts to strengthen its balance sheet through proactive debt management, the Group successfully secured a six-year up to S$82.0 million committed loan facility during the quarter. For more details click here. 
 

Singapore Focused S-REITs Average 10 year Annualised Total Returns of 7.4%

The 22 REITs that report more than a third of their revenue to Singapore are tabled below. While the 22 trusts have averaged a 20.8% decline in the 2020 year-to-date, the 14 trusts that have been listed for the full duration of 10 years have averaged annualised total returns of 7.4% for those 10 years. The 22 stocks have also been recipient of S$161 million in net institutional inflow in the 2020 year to 27 April, while overall, S-REITs have seen a combined  S$26 million in net institutional outflow over the period.




			REIT &amp; Stapled Trust with 1/3 revenue in Singapore
			
			
			Code
			
			
			Mkt Cap S$M
			
			
			Net Insti Inflow YTD (S$M)
			
			
			Total Return YTD %
			
			
			Total Return 31 Dec 19 - 23 Mar 20
			
			
			Total Return 23 Mar 20 - 27 Apr 20
			
			
			10 Year Annualised Total Return 

			%
			
		


			KEPPEL DC REIT
			
			
			AJBU
			
			
			4,115
			
			
			67
			
			
			22.2
			
			
			-4.0
			
			
			27.3
			
			
			N/A
			
		


			MAPLETREE LOGISTICS TRUST
			
			
			M44U
			
			
			6,840
			
			
			68
			
			
			4.2
			
			
			-28.2
			
			
			45.2
			
			
			14.5
			
		


			PARKWAYLIFE REAL ESTATE
			
			
			C2PU
			
			
			2,009
			
			
			0
			
			
			0.9
			
			
			-16.4
			
			
			20.7
			
			
			15.2
			
		


			ASCENDAS REAL ESTATE INV TRT
			
			
			A17U
			
			
			10,203
			
			
			227
			
			
			-4.0
			
			
			-22.1
			
			
			23.1
			
			
			10.5
			
		


			MAPLETREE INDUSTRIAL TRUST
			
			
			ME8U
			
			
			5,370
			
			
			63
			
			
			-5.0
			
			
			-25.6
			
			
			27.7
			
			
			N/A
			
		


			KEPPEL REIT
			
			
			K71U
			
			
			3,650
			
			
			30
			
			
			-11.9
			
			
			-33.9
			
			
			33.3
			
			
			6.1
			
		


			AIMS APAC REIT
			
			
			O5RU
			
			
			820
			
			
			6
			
			
			-17.5
			
			
			-33.8
			
			
			24.7
			
			
			9.9
			
		


			FRASERS COMMERCIAL TRUST
			
			
			ND8U
			
			
			1,189
			
			
			12
			
			
			-20.5
			
			
			-41.3
			
			
			35.4
			
			
			13.1
			
		


			MAPLETREE COMMERCIAL TRUST
			
			
			N2IU
			
			
			5,987
			
			
			-41
			
			
			-23.7
			
			
			-31.7
			
			
			11.7
			
			
			N/A
			
		


			CAPITALAND COMMERCIAL TRUST
			
			
			C61U
			
			
			5,716
			
			
			30
			
			
			-24.2
			
			
			-29.4
			
			
			7.2
			
			
			8.2
			
		


			CACHE LOGISTICS TRUST
			
			
			K2LU
			
			
			558
			
			
			-4
			
			
			-26.6
			
			
			-48.7
			
			
			43.1
			
			
			1.7
			
		


			SPH REIT
			
			
			SK6U
			
			
			2,151
			
			
			-18
			
			
			-26.8
			
			
			-33.2
			
			
			9.5
			
			
			N/A
			
		


			SOILBUILD BUSINESS SPACE REIT
			
			
			SV3U
			
			
			461
			
			
			3
			
			
			-26.9
			
			
			-53.0
			
			
			55.6
			
			
			N/A
			
		


			FRASERS CENTREPOINT TRUST
			
			
			J69U
			
			
			2,239
			
			
			-2
			
			
			-28.1
			
			
			-34.6
			
			
			9.9
			
			
			9.7
			
		


			CAPITALAND MALL TRUST
			
			
			C38U
			
			
			6,347
			
			
			-94
			
			
			-29.2
			
			
			-33.7
			
			
			6.8
			
			
			4.1
			
		


			SUNTEC REIT
			
			
			T82U
			
			
			3,605
			
			
			-42
			
			
			-29.5
			
			
			-38.9
			
			
			15.3
			
			
			5.3
			
		


			SABANA SHARIAH COMP IND REIT
			
			
			M1GU
			
			
			332
			
			
			1
			
			
			-30.4
			
			
			-48.1
			
			
			34.0
			
			
			N/A
			
		


			OUE COMMERCIAL REIT
			
			
			TS0U
			
			
			2,076
			
			
			-14
			
			
			-30.4
			
			
			-46.7
			
			
			30.5
			
			
			N/A
			
		


			FAR EAST HOSPITALITY TRUST*
			
			
			Q5T
			
			
			953
			
			
			-14
			
			
			-32.8
			
			
			-47.9
			
			
			28.9
			
			
			N/A
			
		


			STARHILL GLOBAL REIT
			
			
			P40U
			
			
			1,028
			
			
			-20
			
			
			-34.1
			
			
			-45.4
			
			
			20.5
			
			
			3.5
			
		


			ESR-REIT
			
			
			J91U
			
			
			1,104
			
			
			-21
			
			
			-39.6
			
			
			-54.0
			
			
			31.3
			
			
			3.0
			
		


			CDL HOSPITALITY TRUSTS*
			
			
			J85
			
			
			1,092
			
			
			-75
			
			
			-42.7
			
			
			-56.4
			
			
			31.4
			
			
			-0.9
			
		


			Average
			
			
			 
			
			
			 
			
			
			 
			
			
			-20.8
			
			
			-36.7
			
			
			26.1
			
			
			7.4
			
		

Source: SGX StockFacts, Bloomberg, Thomson Reuters (Data as of 27 April 2020). Note this is based on revenue segmented to Singapore in the last FY.

 
The broader S-REIT performances are tabled below, with the table sort by the S-REITs with the highest average daily turnover in the 2020 year to 27 April.  




			All S-REITs (incl. REITs, Stapled Trusts* and Business Trusts**)
			
			
			Code
			
			
			Mkt Cap S$M
			
			
			Net Insti Inflow YTD (S$M)
			
			
			Total Return YTD %
			
			
			Total Return 31 Dec 19 - 23 Mar 20 %
			
			
			Total Return 23 Mar 20 - 27 Apr 20

			%
			
			
			10 Year Annualised Total Return 

			%
			
		


			ASCENDAS REAL ESTATE INV TRT
			
			
			A17U
			
			
			10,203
			
			
			227
			
			
			-4.0
			
			
			-22.1
			
			
			23.1
			
			
			10
			
		


			CAPITALAND MALL TRUST
			
			
			C38U
			
			
			6,347
			
			
			-94
			
			
			-29.2
			
			
			-33.7
			
			
			6.8
			
			
			4
			
		


			MAPLETREE COMMERCIAL TRUST
			
			
			N2IU
			
			
			5,987
			
			
			-41
			
			
			-23.7
			
			
			-31.7
			
			
			11.7
			
			
			N/A
			
		


			MAPLETREE LOGISTICS TRUST
			
			
			M44U
			
			
			6,840
			
			
			68
			
			
			4.2
			
			
			-28.2
			
			
			45.2
			
			
			15
			
		


			CAPITALAND COMMERCIAL TRUST
			
			
			C61U
			
			
			5,716
			
			
			30
			
			
			-24.2
			
			
			-29.4
			
			
			7.2
			
			
			8
			
		


			MAPLETREE INDUSTRIAL TRUST
			
			
			ME8U
			
			
			5,370
			
			
			63
			
			
			-5.0
			
			
			-25.6
			
			
			27.7
			
			
			N/A
			
		


			SUNTEC REIT
			
			
			T82U
			
			
			3,605
			
			
			-42
			
			
			-29.5
			
			
			-38.9
			
			
			15.3
			
			
			5
			
		


			KEPPEL DC REIT
			
			
			AJBU
			
			
			4,115
			
			
			67
			
			
			22.2
			
			
			-4.0
			
			
			27.3
			
			
			N/A
			
		


			MAPLETREE NORTH ASIA COM TRUST
			
			
			RW0U
			
			
			2,827
			
			
			-9
			
			
			-22.8
			
			
			-38.7
			
			
			25.9
			
			
			N/A
			
		


			FRASERS LOGISTICS &amp; INDUSTRIAL
			
			
			BUOU
			
			
			2,228
			
			
			28
			
			
			-20.6
			
			
			-46.4
			
			
			48.1
			
			
			N/A
			
		


			KEPPEL REIT
			
			
			K71U
			
			
			3,650
			
			
			30
			
			
			-11.9
			
			
			-33.9
			
			
			33.3
			
			
			6
			
		


			ASCOTT RESIDENCE TRUST*
			
			
			HMN
			
			
			2,565
			
			
			-35
			
			
			-35.6
			
			
			-46.8
			
			
			21.2
			
			
			4
			
		


			FRASERS CENTREPOINT TRUST
			
			
			J69U
			
			
			2,239
			
			
			-2
			
			
			-28.1
			
			
			-34.6
			
			
			9.9
			
			
			10
			
		


			ESR-REIT
			
			
			J91U
			
			
			1,104
			
			
			-21
			
			
			-39.6
			
			
			-54.0
			
			
			31.3
			
			
			3
			
		


			CDL HOSPITALITY TRUSTS*
			
			
			J85
			
			
			1,092
			
			
			-75
			
			
			-42.7
			
			
			-56.4
			
			
			31.4
			
			
			-1
			
		


			MANULIFE US REIT
			
			
			BTOU
			
			
			1,561
			
			
			-3
			
			
			-25.0
			
			
			-39.0
			
			
			22.8
			
			
			N/A
			
		


			CAPITALAND RETAIL CHINA TRUST
			
			
			AU8U
			
			
			1,626
			
			
			-38
			
			
			-15.4
			
			
			-37.4
			
			
			35.0
			
			
			8
			
		


			CROMWELL EUROPEAN REIT
			
			
			CNNU
			
			
			1,472
			
			
			1
			
			
			-26.7
			
			
			-42.1
			
			
			26.8
			
			
			N/A
			
		


			LENDLEASE GLOBAL COMMERCIAL
			
			
			JYEU
			
			
			643
			
			
			-50
			
			
			-40.0
			
			
			-41.6
			
			
			2.8
			
			
			N/A
			
		


			FRASERS COMMERCIAL TRUST
			
			
			ND8U
			
			
			1,189
			
			
			12
			
			
			-20.5
			
			
			-41.3
			
			
			35.4
			
			
			13
			
		


			SPH REIT
			
			
			SK6U
			
			
			2,151
			
			
			-18
			
			
			-26.8
			
			
			-33.2
			
			
			9.5
			
			
			N/A
			
		


			SASSEUR REIT
			
			
			CRPU
			
			
			851
			
			
			-22
			
			
			-18.1
			
			
			-35.4
			
			
			26.8
			
			
			N/A
			
		


			PARKWAYLIFE REIT
			
			
			C2PU
			
			
			2,009
			
			
			0
			
			
			0.9
			
			
			-16.4
			
			
			20.7
			
			
			15
			
		


			ASCENDAS INDIA TRUST**
			
			
			CY6U
			
			
			1,398
			
			
			6
			
			
			-21.0
			
			
			-35.3
			
			
			22.0
			
			
			9
			
		


			KEPPEL PACIFIC OAK US REIT
			
			
			CMOU
			
			
			764
			
			
			-13
			
			
			-21.1
			
			
			-38.7
			
			
			28.7
			
			
			N/A
			
		


			AIMS APAC REIT
			
			
			O5RU
			
			
			820
			
			
			6
			
			
			-17.5
			
			
			-33.8
			
			
			24.7
			
			
			10
			
		


			PRIME US REIT
			
			
			OXMU
			
			
			1,015
			
			
			-3
			
			
			-22.7
			
			
			-38.7
			
			
			26.2
			
			
			N/A
			
		


			FIRST REAL ESTATE INVT TRUST
			
			
			AW9U
			
			
			624
			
			
			-18
			
			
			-19.9
			
			
			-41.0
			
			
			35.7
			
			
			9
			
		


			FAR EAST HOSPITALITY TRUST*
			
			
			Q5T
			
			
			953
			
			
			-14
			
			
			-32.8
			
			
			-47.9
			
			
			28.9
			
			
			N/A
			
		


			STARHILL GLOBAL REIT
			
			
			P40U
			
			
			1,028
			
			
			-20
			
			
			-34.1
			
			
			-45.4
			
			
			20.5
			
			
			4
			
		


			IREIT GLOBAL
			
			
			UD1U
			
			
			415
			
			
			-4
			
			
			-17.2
			
			
			-47.2
			
			
			56.6
			
			
			N/A
			
		


			OUE COMMERCIAL REIT
			
			
			TS0U
			
			
			2,076
			
			
			-14
			
			
			-30.4
			
			
			-46.7
			
			
			30.5
			
			
			N/A
			
		


			CACHE LOGISTICS TRUST
			
			
			K2LU
			
			
			558
			
			
			-4
			
			
			-26.6
			
			
			-48.7
			
			
			43.1
			
			
			2
			
		


			EAGLE HOSPITALITY TRUST*
			
			
			LIW
			
			
			170
			
			
			-9
			
			
			-73.5
			
			
			-72.7
			
			
			-2.6
			
			
			N/A
			
		


			LIPPO MALLS INDONESIA RETAIL
			
			
			D5IU
			
			
			416
			
			
			-9
			
			
			-35.4
			
			
			-51.7
			
			
			34.0
			
			
			-2
			
		


			EC WORLD REIT
			
			
			BWCU
			
			
			522
			
			
			-12
			
			
			-10.6
			
			
			-39.5
			
			
			47.7
			
			
			N/A
			
		


			ELITE COMMERCIAL REIT
			
			
			MXNU
			
			
			389
			
			
			3
			
			
			0.0
			
			
			0.0
			
			
			28.7
			
			
			N/A
			
		


			SOILBUILD BUSINESS SPACE REIT
			
			
			SV3U
			
			
			461
			
			
			3
			
			
			-26.9
			
			
			-53.0
			
			
			55.6
			
			
			N/A
			
		


			FRASERS HOSPITALITY TRUST*
			
			
			ACV
			
			
			907
			
			
			-5
			
			
			-33.1
			
			
			-50.7
			
			
			35.7
			
			
			N/A
			
		


			SABANA SHARIAH COMP IND REIT
			
			
			M1GU
			
			
			332
			
			
			1
			
			
			-30.4
			
			
			-48.1
			
			
			34.0
			
			
			N/A
			
		


			UNITED HAMPSHIRE US REIT
			
			
			ODBU
			
			
			437
			
			
			-2
			
			
			0.0
			
			
			0.0
			
			
			29.5
			
			
			N/A
			
		


			ARA US HOSPITALITY TRUST*
			
			
			XZL
			
			
			342
			
			
			5
			
			
			-45.7
			
			
			-58.0
			
			
			29.4
			
			
			N/A
			
		


			DASIN RETAIL TRUST**
			
			
			CEDU
			
			
			519
			
			
			1
			
			
			-1.7
			
			
			-2.4
			
			
			0.6
			
			
			N/A
			
		


			BHG RETAIL REIT
			
			
			BMGU
			
			
			311
			
			
			0
			
			
			-8.2
			
			
			-33.8
			
			
			38.6
			
			
			N/A
			
		


			Average
			
			
			 
			
			
			 
			
			
			 
			
			
			-22.1
			
			
			-37.4
			
			
			27.1
			
			
			6.9
			
		

 Source: SGX StockFacts, Bloomberg, Thomson Reuters (Data as of 27 April 2020)



Keppel DC REIT, MLT & PLife REIT Lodge Gains in 2020 YTD

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Singapore Air today released a long <a href="https://links.sgx.com/FileOpen/SIA%20Rights%20Issue%20-%20Presentation%20Slides%20200420.ashx?App=Announcement&amp;FileID=607355" target="_blank" rel="noopener">presentation</a> regarding the condition of the company, and the industry within the context of the sharp decline in traffic due to measures taken to reduce the spread of the global covid-19 pandemic. It is well worth a read for both current shareholders and those who would look at becoming shareholders or participating in the Rights Shares or Rights MCB Entitlements trading once they go ex- on 7 May 2020. Because it is such a large event - a 3:2 rights offering increases shares outstanding by 150% - and there are many moving parts (shares, rights going ex, rights trading, some rights for shares and some rights for non-shares), it behooves one to understand the index treatment and timing. So we dig in, and discuss below.

Singapore Air today released a long presentation regarding the condition of the company, and the industry within the context of the sharp decline in traffic due to measures taken to reduce the spread of the global covid-19 pandemic. It is well worth a read for both current shareholders and those who would look at becoming shareholders or participating in the Rights Shares or Rights MCB Entitlements trading once they go ex- on 7 May 2020. Because it is such a large event - a 3:2 rights offering increases shares outstanding by 150% - and there are many moving parts (shares, rights going ex, rights trading, some rights for shares and some rights for non-shares), it behooves one to understand the index treatment and timing. So we dig in, and discuss below.

Singapore Air Rights - The Index Treatment

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Capitaland Integrated Commercial Trust / Equity Bottom-Up

<div>
The Ministry of Finance (MOF), the Inland Revenue Authority of Singapore (IRAS), and the Monetary Authority of Singapore (MAS) yesterday announced a set of new measures to provide REITs with greater flexibility to manage their cash flows.
In this insight, I'll talk about the likely implications of the same.
Links to my previous insights on SREITs are below:
<ul>
<li>In <a href="https://www.smartkarma.com/insights/singapore-reits-what-s-been-cooking-this-year" target="_blank" rel="noopener">Singapore REITs - What’s Been Cooking This Year</a> I spoke about how the REITs have performed this year and touched upon some of the factors that have been driving them.</li>
<li>In my follow-up insight, <a href="https://www.smartkarma.com/insights/trade-ideas-for-sgreits-retail-reits-share-price-has-been-more-resilient-than-it-should-be" target="_blank" rel="noopener">Trade Ideas for SGREITs - Retail REITs Share Price Has Been More Resilient than It Should Be,</a> I spoke about the factors that have been impacting retail REITs.</li>
<li>In <a href="https://www.smartkarma.com/insights/trade-ideas-sg-office-reits-this-time-it-s-different" target="_blank" rel="noopener">Trade Ideas SG Office REITs - This Time It’s Different</a> I spoke about how the office REITs might fare better.</li>
<li>In <a href="https://www.smartkarma.com/insights/trade-ideas-sg-industrial-reits-bigger-names-have-been-holding-up-a-little-too-well" target="_blank" rel="noopener">Trade Ideas SG Industrial REITs - Bigger Names Have Been Holding up a Little Too Well</a> I spoke about how the larger industrial REITs appear to be a little too expensive.</li>
</ul>
</div>


The Ministry of Finance (MOF), the Inland Revenue Authority of Singapore (IRAS), and the Monetary Authority of Singapore (MAS) yesterday announced a set of new measures to provide REITs with greater flexibility to manage their cash flows.
In this insight, I'll talk about the likely implications of the same.
Links to my previous insights on SREITs are below:

In Singapore REITs - What’s Been Cooking This Year I spoke about how the REITs have performed this year and touched upon some of the factors that have been driving them.
In my follow-up insight, Trade Ideas for SGREITs - Retail REITs Share Price Has Been More Resilient than It Should Be, I spoke about the factors that have been impacting retail REITs.
In Trade Ideas SG Office REITs - This Time It’s Different I spoke about how the office REITs might fare better.
In Trade Ideas SG Industrial REITs - Bigger Names Have Been Holding up a Little Too Well I spoke about how the larger industrial REITs appear to be a little too expensive.



Singapore REITs - Get Out of Jail Free Card, for the Tenants

<div>
In my previous insight, <a href="https://www.smartkarma.com/insights/singapore-reits-what-s-been-cooking-this-year" target="_blank" rel="noopener">Singapore REITs - What’s Been Cooking This Year,</a> I spoke about how the REITs have performed this year and touched upon some of the factors that have been driving them. In my follow-up insight, <a href="https://www.smartkarma.com/insights/trade-ideas-for-sgreits-retail-reits-share-price-has-been-more-resilient-than-it-should-be" target="_blank" rel="noopener">Trade Ideas for SGREITs - Retail REITs Share Price Has Been More Resilient than It Should Be,</a> I spoke about the factors that have been impacting retail REITs. And in <a href="https://www.smartkarma.com/insights/trade-ideas-sg-office-reits-this-time-it-s-different" target="_blank" rel="noopener">Trade Ideas SG Office REITs - This Time It’s Different</a> I spoke about how the office REITs might fare better.
<div id="annotable-executive_summary-1">In this insight, I'll take a closer look at some of the issues with industrial REITs this year.</div>
</div>


In my previous insight, Singapore REITs - What’s Been Cooking This Year, I spoke about how the REITs have performed this year and touched upon some of the factors that have been driving them. In my follow-up insight, Trade Ideas for SGREITs - Retail REITs Share Price Has Been More Resilient than It Should Be, I spoke about the factors that have been impacting retail REITs. And in Trade Ideas SG Office REITs - This Time It’s Different I spoke about how the office REITs might fare better.
In this insight, I'll take a closer look at some of the issues with industrial REITs this year.


Trade Ideas SG Industrial REITs - Bigger Names Have Been Holding up a Little Too Well

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<ul>
<li>
Amidst increased volatility in global markets, DLCs may be a useful tool in hedging investment portfolios and capturing short-term market trends. DLCs offer the flexibility to trade both rising and falling markets, and for each underlying and leverage level, there is a long and short DLC available. 
	 </li>
	<li>
SGX hosts the trading of 76 DLCs on Singapore and Hong Kong stocks. The Single Stock DLCs provide 5x leverage on the daily performance of the underlying stock. For March 2020, total DLC turnover reached S$564.4 million, more than double Feb’s S$267.0 million. Turnover for Single Stock DLCs jumped 90% MoM to S$414million, accounting for 73% of overall trading activity. 
	 </li>
	<li>In March, the five most traded Single Stock DLCs were 5xShort HSBC, 5xShort DBS, 5xLong DBS, 5xLong Tencent and 5xShort OCBC. The best-performing DLCs during the month were Short DLCs on SIA, DBS, HSBC and UOB, with gains ranging from +93.2% to +112.5%.</li>
</ul>
 

Daily Leverage Certificates (DLCs) are financial instruments issued by a third-party financial institution, in this case Societe Generale, and are traded on SGX. DLCs seek to achieve short-term investment results that correspond to the daily magnified performance of the underlying index or stock.

DLCs offer the flexibility to trade both rising and falling markets, and for each underlying and leverage level, there is a long and short DLC available. The instrument offers investors fixed leverage of up to 7 times of the daily performance of the underlying asset (eg. market indices or single stocks). The basic principle is simple – if the underlying asset moves by 1% from its closing price of the previous trading day, the value of a 3x DLC will move by 3%, and correspondingly that of a 7x DLC will move by 7%. More information on DLCs, including risks, can be found <a href="https://www2.sgx.com/research-education/securities-products#Daily%20Leverage%20Certificates">here</a>.

SGX hosts the trading of 76 DLCs on Singapore and Hong Kong stocks, including the three local banks, Venture, Tencent, and Geely Automobile. The single stock DLCs provide 5x leverage on the daily performance of the underlying stock. View the full list of Single Stock DLCs at the issuer’s website <a href="https://dlc.socgen.com/en/product/search">here</a>.

Single Stock DLC Turnover for March Increases

For the month of March 2020, total DLC turnover reached S$564.4 million, more than double February’s S$267.0 million. Turnover for Single Stock DLCs also jumped 90% month-on-month in March to S$414 million, accounting for 73% of overall trading activity. For Single Stock DLC flows, Short DLCs comprised 54% of total turnover, with Long DLCs taking up the remaining 46%.
</body></html>

<figure>
 <img src='https://api2.sgx.com/sites/default/files/2020-04/DLC%20Turnover%20in%20March.PNG' alt='DLC Turnover in March ' />
 </figure>
 <div class='content-caption'>DLC Turnover in March </div>
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<html><body>The five most traded Single Stock DLCs in March were 5xShort HSBC (DYAW), 5xShort DBS (DFFW), 5xLong DBS (DOXW), 5xLong Tencent (DANW) and 5xShort OCBC (DJWW).</body></html>

<figure>
 <img src='https://api2.sgx.com/sites/default/files/2020-04/5%20most%20traded%20dlcs.PNG' alt='Five Most Traded Single stock DLCs in March ' />
 </figure>
 <div class='content-caption'>Five Most Traded Single stock DLCs in March </div>
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Best- and Least-Performing Single Stock DLCs in March

The best performers in the month of March were the Short DLCs for SIA, DBS, HSBC and UOB, with gains ranging from +93.2% to +112.5%. The least performers were the Long DLCs for AAC Technologies, City Developments, CNOOC, SIA, and Sunny Optical, with declines ranging from - 83.3% to -100%.
</body></html>

<figure>
 <img src='https://api2.sgx.com/sites/default/files/2020-04/March%20%20Performers.PNG' alt='March Performers' />
 </figure>
 <div class='content-caption'>March Performers</div>
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Banking and airline stocks have been battered in recent weeks as countries impose stringent lockdowns. With the Federal Reserve cutting US interest rates for the second time in less than two weeks on 15 March, net interest margins (NIMs) of most bank stocks will be impacted. UK-based banks have also been affected by the Prudential Regulation Authority’s (PRA) recommendation that the country’s financial institutions suspend investor payouts until at least the fourth quarter.

On 31 March, the International Air Transport Association (IATA) published an updated <a href="https://www.iata.org/en/pressroom/pr/2020-03-31-01/">analysis</a> showing that airlines may burn through US$61 billion of their cash reserves during 2QCY20, while posting a quarterly net loss of US$39 billion. The estimate was based on the modelling of severe travel restrictions lasting for three months.

Listing of New Long DLCs with Higher Sensitivities 

<table class="table table-striped"><tbody>
<tr>
<td>
			Stock Codes
			</td>
			<td>
			Trading Name (22)
			</td>
			<td>
			Type 
			</td>
			<td>
			Leverage Factor
			</td>
			<td>
			Underlying Stock
			</td>
			<td>
			Listing Date
			</td>
		</tr>
<tr>
<td>
			DVPW
			</td>
			<td>
			DLC SG5xLongGeely B
			</td>
			<td>
			Long
			</td>
			<td>
			5x
			</td>
			<td>
			Geely Auto (0175.HK)
			</td>
			<td rowspan="5">
			08-Apr-20
			</td>
		</tr>
<tr>
<td>
			DBTW
			</td>
			<td>
			DLC SG5xLongGalaxy A
			</td>
			<td>
			Long
			</td>
			<td>
			5x
			</td>
			<td>
			Galaxy Ent (0027.HK)
			</td>
		</tr>
<tr>
<td>
			DAFW
			</td>
			<td>
			DLC SG5xLongAAC A
			</td>
			<td>
			Long
			</td>
			<td>
			5x
			</td>
			<td>
			AAC Tech (2018.HK)
			</td>
		</tr>
<tr>
<td>
			D00W
			</td>
			<td>
			DLC SG5xLongPetChina B
			</td>
			<td>
			Long
			</td>
			<td>
			5x
			</td>
			<td>
			PetroChina (0857.HK)
			</td>
		</tr>
<tr>
<td>
			DTJW
			</td>
			<td>
			DLC SG5xLongCNOOC A
			</td>
			<td>
			Long
			</td>
			<td>
			5x
			</td>
			<td>
			CNOOC (0883.HK)
			</td>
		</tr>
<tr>
<td>
			DEUW
			</td>
			<td>
			DLC SG5xLongCityDev A
			</td>
			<td>
			Long
			</td>
			<td>
			5x
			</td>
			<td>
			City Dev (C09)
			</td>
			<td rowspan="3">
			09-Apr-20
			</td>
		</tr>
<tr>
<td>
			DQAW
			</td>
			<td>
			DLC SG5xLongAREIT A
			</td>
			<td>
			Long
			</td>
			<td>
			5x
			</td>
			<td>
			Ascendas REIT (A17U)
			</td>
		</tr>
<tr>
<td>
			CZAW
			</td>
			<td>
			DLC SG7xLongMSG230404
			</td>
			<td>
			Long
			</td>
			<td>
			7x
			</td>
			<td>
			MSCI Singapore Index
			</td>
		</tr>
</tbody></table>
Reason to Issue More Than One DLC

When a DLC’s unit price reaches too low a level, it may become less sensitive to the underlying asset movement. In this case, the issuer may list a new DLC on the same underlying asset, direction and leverage factor, but at higher unit price with increased sensitivity to the underlying asset movement, which is more favourable for short-term trading.

How to Differentiate Between Existing and New DLCs

For index DLCs, investors can differentiate between the existing and new DLCs by their expiry date as indicated in the counter name and by their stock code. The new products will have a longer dated expiry.

For single stock DLCs, apart from the difference in stock code, a letter ("A", "B" and so forth) will be added to the new product name for easy identification. For example, the name of the new 5x Short DLC on Tencent is "DLC SG5xShortTencent A". Investors can also go to SGX website under “Prices” page or SocGen's <a href="https://dlc.socgen.com">website</a> to check the difference in expiry date.

What Will Happen to Existing DLCs

Despite the difference in price sensitivity and expiry date, investors should note that both the existing and new products will move in line with the underlying asset multiplied by the leverage factor. SocGen will continue to provide the same market making quality for both new and old DLCs.

DLCs and Compounding

Investors that hold the DLCs for longer than one Trading Day will notice that the return could be more or less than the leverage factor that is embedded within the DLC. This is because the performances of the underlying asset and the DLCs are reset at the end of each Trading Day.

When markets open on the next day, the performances of the underlying asset and the DLCs will be measured from the intrinsic closing levels recorded on the previous Trading Day. What this means, in practice, is the performance each day is locked in, and any subsequent returns are on top of what was achieved the day before. This is a process referred to as “compounding”.

The compounding effect can positively enhance returns in trending markets (upward or downward) whilst negatively impacting returns when the markets are more volatile or trend sideways for long periods. To learn more about the compounding effect and other features of the DLCs, click <a href="https://www2.sgx.com/research-education/securities-products#Daily%20Leverage%20Certificates">here</a>.

Specified Investment Products (SIPs)

Daily Leverage Certificates (DLCs) are for investors who are willing to accept the risk of substantial losses up to the principal investment amount, possibly within a very short time frame. Investors should also have sufficient understanding of the product and should possess either a high level of knowledge or sufficient trading experience to properly evaluate and assess the product structure, associated risks, valuation, costs and expected returns. All investors need to be Specified Investment Products (SIP) qualified to invest in DLCs.

Investors should also read all listing documents provided by the issuer for other features such as the airbag mechanism, the risks and other information related to the product before trading the DLCs. The documents can be found under company information on <a href="https://www.sgx.com/research-education/securities-products?fireglass_rsn=true#Daily%20Leverage%20Certificates">SGX</a> or the Issuer’s <a href="https://dlc.socgen.com/">website</a>.
</body></html>





Amidst increased volatility in global markets, DLCs may be a useful tool in hedging investment portfolios and capturing short-term market trends. DLCs offer the flexibility to trade both rising and falling markets, and for each underlying and leverage level, there is a long and short DLC available. 
	 
	
SGX hosts the trading of 76 DLCs on Singapore and Hong Kong stocks. The Single Stock DLCs provide 5x leverage on the daily performance of the underlying stock. For March 2020, total DLC turnover reached S$564.4 million, more than double Feb’s S$267.0 million. Turnover for Single Stock DLCs jumped 90% MoM to S$414million, accounting for 73% of overall trading activity. 
	 
	In March, the five most traded Single Stock DLCs were 5xShort HSBC, 5xShort DBS, 5xLong DBS, 5xLong Tencent and 5xShort OCBC. The best-performing DLCs during the month were Short DLCs on SIA, DBS, HSBC and UOB, with gains ranging from +93.2% to +112.5%.

 

Daily Leverage Certificates (DLCs) are financial instruments issued by a third-party financial institution, in this case Societe Generale, and are traded on SGX. DLCs seek to achieve short-term investment results that correspond to the daily magnified performance of the underlying index or stock.

DLCs offer the flexibility to trade both rising and falling markets, and for each underlying and leverage level, there is a long and short DLC available. The instrument offers investors fixed leverage of up to 7 times of the daily performance of the underlying asset (eg. market indices or single stocks). The basic principle is simple – if the underlying asset moves by 1% from its closing price of the previous trading day, the value of a 3x DLC will move by 3%, and correspondingly that of a 7x DLC will move by 7%. More information on DLCs, including risks, can be found here.

SGX hosts the trading of 76 DLCs on Singapore and Hong Kong stocks, including the three local banks, Venture, Tencent, and Geely Automobile. The single stock DLCs provide 5x leverage on the daily performance of the underlying stock. View the full list of Single Stock DLCs at the issuer’s website here.

Single Stock DLC Turnover for March Increases

For the month of March 2020, total DLC turnover reached S$564.4 million, more than double February’s S$267.0 million. Turnover for Single Stock DLCs also jumped 90% month-on-month in March to S$414 million, accounting for 73% of overall trading activity. For Single Stock DLC flows, Short DLCs comprised 54% of total turnover, with Long DLCs taking up the remaining 46%.



      
    
    DLC Turnover in March 

The five most traded Single Stock DLCs in March were 5xShort HSBC (DYAW), 5xShort DBS (DFFW), 5xLong DBS (DOXW), 5xLong Tencent (DANW) and 5xShort OCBC (DJWW).


      
    
    Five Most Traded Single stock DLCs in March 


Best- and Least-Performing Single Stock DLCs in March

The best performers in the month of March were the Short DLCs for SIA, DBS, HSBC and UOB, with gains ranging from +93.2% to +112.5%. The least performers were the Long DLCs for AAC Technologies, City Developments, CNOOC, SIA, and Sunny Optical, with declines ranging from - 83.3% to -100%.



      
    
    March Performers


Banking and airline stocks have been battered in recent weeks as countries impose stringent lockdowns. With the Federal Reserve cutting US interest rates for the second time in less than two weeks on 15 March, net interest margins (NIMs) of most bank stocks will be impacted. UK-based banks have also been affected by the Prudential Regulation Authority’s (PRA) recommendation that the country’s financial institutions suspend investor payouts until at least the fourth quarter.

On 31 March, the International Air Transport Association (IATA) published an updated analysis showing that airlines may burn through US$61 billion of their cash reserves during 2QCY20, while posting a quarterly net loss of US$39 billion. The estimate was based on the modelling of severe travel restrictions lasting for three months.

Listing of New Long DLCs with Higher Sensitivities 




			Stock Codes
			
			
			Trading Name (22)
			
			
			Type 
			
			
			Leverage Factor
			
			
			Underlying Stock
			
			
			Listing Date
			
		


			DVPW
			
			
			DLC SG5xLongGeely B
			
			
			Long
			
			
			5x
			
			
			Geely Auto (0175.HK)
			
			
			08-Apr-20
			
		


			DBTW
			
			
			DLC SG5xLongGalaxy A
			
			
			Long
			
			
			5x
			
			
			Galaxy Ent (0027.HK)
			
		


			DAFW
			
			
			DLC SG5xLongAAC A
			
			
			Long
			
			
			5x
			
			
			AAC Tech (2018.HK)
			
		


			D00W
			
			
			DLC SG5xLongPetChina B
			
			
			Long
			
			
			5x
			
			
			PetroChina (0857.HK)
			
		


			DTJW
			
			
			DLC SG5xLongCNOOC A
			
			
			Long
			
			
			5x
			
			
			CNOOC (0883.HK)
			
		


			DEUW
			
			
			DLC SG5xLongCityDev A
			
			
			Long
			
			
			5x
			
			
			City Dev (C09)
			
			
			09-Apr-20
			
		


			DQAW
			
			
			DLC SG5xLongAREIT A
			
			
			Long
			
			
			5x
			
			
			Ascendas REIT (A17U)
			
		


			CZAW
			
			
			DLC SG7xLongMSG230404
			
			
			Long
			
			
			7x
			
			
			MSCI Singapore Index
			
		

Reason to Issue More Than One DLC

When a DLC’s unit price reaches too low a level, it may become less sensitive to the underlying asset movement. In this case, the issuer may list a new DLC on the same underlying asset, direction and leverage factor, but at higher unit price with increased sensitivity to the underlying asset movement, which is more favourable for short-term trading.

How to Differentiate Between Existing and New DLCs

For index DLCs, investors can differentiate between the existing and new DLCs by their expiry date as indicated in the counter name and by their stock code. The new products will have a longer dated expiry.

For single stock DLCs, apart from the difference in stock code, a letter ("A", "B" and so forth) will be added to the new product name for easy identification. For example, the name of the new 5x Short DLC on Tencent is "DLC SG5xShortTencent A". Investors can also go to SGX website under “Prices” page or SocGen's website to check the difference in expiry date.

What Will Happen to Existing DLCs

Despite the difference in price sensitivity and expiry date, investors should note that both the existing and new products will move in line with the underlying asset multiplied by the leverage factor. SocGen will continue to provide the same market making quality for both new and old DLCs.

DLCs and Compounding

Investors that hold the DLCs for longer than one Trading Day will notice that the return could be more or less than the leverage factor that is embedded within the DLC. This is because the performances of the underlying asset and the DLCs are reset at the end of each Trading Day.

When markets open on the next day, the performances of the underlying asset and the DLCs will be measured from the intrinsic closing levels recorded on the previous Trading Day. What this means, in practice, is the performance each day is locked in, and any subsequent returns are on top of what was achieved the day before. This is a process referred to as “compounding”.

The compounding effect can positively enhance returns in trending markets (upward or downward) whilst negatively impacting returns when the markets are more volatile or trend sideways for long periods. To learn more about the compounding effect and other features of the DLCs, click here.

Specified Investment Products (SIPs)

Daily Leverage Certificates (DLCs) are for investors who are willing to accept the risk of substantial losses up to the principal investment amount, possibly within a very short time frame. Investors should also have sufficient understanding of the product and should possess either a high level of knowledge or sufficient trading experience to properly evaluate and assess the product structure, associated risks, valuation, costs and expected returns. All investors need to be Specified Investment Products (SIP) qualified to invest in DLCs.

Investors should also read all listing documents provided by the issuer for other features such as the airbag mechanism, the risks and other information related to the product before trading the DLCs. The documents can be found under company information on SGX or the Issuer’s website.



Single Stock DLCs Dominate March DLC Turnover

Singapore

CapitaLand Ascendas REIT is an industrial real estate investment trust. The Trust invests in business and science park properties, integrated development, amenities, and retail (IDAR) properties, high-specifications industrial properties and data centers, light industrial and flatted factories, and logistics and distribution centers.

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CapitaLand Ascendas REIT (CLAR SP)

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Single Stock DLCs Dominate March DLC Turnover

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