The Singapore market continued to weaken in Sep, sending the STI 2.6% lower due to the uncertainty of economic recovery, worsening trends of Covid-19 situations in US and Europe as well as the upcoming uncertainties due to the US presidential elections.
As Singapore is preparing to move into Phase 3 reopening, the retail sales in Sep still remained challenging, with projection of a 6% contraction in 2020. Year till date, the STI index suffered a total loss of 20.7%.
The REIT portfolio was impacted by the global pandemic Covid-19 as well. YTD Sep, the Advanced portfolio (leverage) was down by 27%, which is underperformed the STI by 7%. The Normal portfolio (without leverage) was down by 14%, which outperformed the STI by 6%.
The major impact on the portfolio was due to the correction of one of our component stocks, First REIT. The REIT's DPU was impacted by the rental support package to its tenants and the announcement from its major tenant and shareholder to review the rental support has triggered a sell down on the REIT in June. The REIT has received a restructuring proposal recently and they are currently reviewing the proposal. In light of the uncertainties, we have made some rebalancing this month.
The annualised portfolio yield is still remain at double-digit of 10.2%.
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While most of the REITs are currently experiencing income disruption due to the pandemic, most of it may be temporary and recovery is expected once the pandemic is over. However, investors need to take note that the uncertainties are likely to remain in the middle term. With the pandemic continuing to impact the global economies, rental income disruption may continue for some time. Investors may therefore want to evaluate the portfolio risks closely.
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