• For the 2H21 to 24 Sep, China stock indices were among the least performing global benchmarks, with the FTSE China A50 Index declining 12% and HSCEI declining 18%. By comparison, the Singapore FTSE ST China Index has generated a 6% decline, with performances ranging from a 22% gain for China Everbright Water to a 29% decline for The Place Holdings. 
   
• Much China focus since 14 Sep has been on the future of China Evergrande, given the social toll of real estate defaults, the clear mandate of policymakers to rein in the debt of China Developers, and the potential systemic impacts to counterparties and adjacent industries. The stock has declined 77% in the 2H21 to 24 Sep.
   
• On 30 Sep, China Caixin PMIs will be in the spotlight following the sharp declines in Manufacturing and Services in August which coincided with the weekly confirmed new cases of COVID-19 in China reaching highs last seen in January 2021, and containment measures and mobility restrictions through China’s zero-COVID policy shutdowns.

 

Like much of the world, the China economy has seen a deceleration in economic growth over the past three months. In July, the IMF trimmed its growth estimate for China in 2021 from 8.4% to 8.1%, which has coincided with sequential weaker economic reports over the past 12 weeks. China will be in focus this week ahead of the week-long National Golden Week holiday from 1 Oct to 7 Oct. All eyes will be on President Xi’s National Day policy speech on 1 Oct that also marks the 72nd anniversary of the founding of the People’s Republic of China.

Since 30 June, China stock indices have been among the least performing global benchmarks over the 12 weeks, with the FTSE China A50 Index declining 12% and Hang Seng China Enterprises Index declining 18%. From the beginning of 2H21, China’s high frequency economic indicators have reduced the momentum displayed in 1H21. The Caixin Manufacturing PMI declined from 51.3 in June to 50.3 in July, then moved into contraction at 49.2 in August. During August, weekly confirmed new cases of COVID-19 in China reached above highs of more than 700 cases, last seen in January 2021. This also saw the Caixin Services PMI fall from 54.9 in July to 46.7 in August. In-line with the Caixin reports, China Retail Sales YoY growth has decelerated from 23.0% for the first six months of 2021, to 18.1% for the first eight months of 2021 with Industrial Production also decelerating from 15.9% for the first six months of 2021, to 13.1% for the first eight months of 2021.

While the weekly confirmed cases gauge had declined from above 700 cases in mid-August to near 170 cases by 9 Sep, it had returned to 490 cases on 18 Sep, then regressed to 329 on 25 Sep. While the number of cases may seem comparatively low, China’s bold zero-COVID policy approach that restrict mobility and contain economic activity was activated. At the same time, China has remarkably administered at least one dose of the COVID-19 vaccine to 1.1 billion people. Hence focus in the weeks ahead will firstly be on the Caixin PMIs for September, due 30 Sep, followed by any signs of China easing its strict COVID-19 containment measures. 

China Evergrande Group

Another factor recently attracted as much focus as the recent growth deceleration, is the outlook for China Evergrande Group and potential systemic ramifications of a potential default of the developer cum conglomerate. The modern day size and impact of China Evergrande Group is established by the Group ranking #122 in the Fortune Global 500 rankings for 2021 (ahead of Country Garden Holdings which ranked #139). The conglomerate reported its FY20 (ended 31 Dec) net profit was down 6% from FY19 at RMB 31 billion, however much market focus on the stock in 2020 was its increased debt and net gearing, in addition to cash flow concerns. Since 2012, market observers have noted that the Group’s major debt ratio indicators have note abated following on from its listing in 2009.

Key recent development include:

• Its 1HFY21 net profit was reported on 31 Aug to be down 29% YoY at RMB 10.5 billion, attributable to the decrease in delivered area and the nationwide sales promotion activities and sales price concessions of the Group which caused decreased sales price. At the same time its total liabilities had gradually increased from RMB 1.85 trillion at the end of FY19 to RMB 1.97 trillion in 1HFY21, with RMB 240 billion or 42.0% of its borrowings due within 12 months of 30 June 2021. The Group also noted that as of 30 June 2021, the average interest rate of borrowings was 9.02% per annum, down from 9.49% on 31 Dec 2020. 
• On 14 Sep, the Group announced it expected significant continuing decline in contract sales in the current month, thereby “resulting in the continuous deterioration of cash collection by the Group which would in turn place tremendous pressure on the Group’s cashflow and liquidity” and had engaged Financial Advisers. The following day, Lucror Analytics noted that the hiring Financial Advisors could be a precursor to a debt restructuring, and that the Group was is in talks with onshore banks and financial institutions, as well as retail investors on repayment options, while a restructuring plan with bondholders may be inevitable.
• Following one of the Group's subsidiaries filing an announcement in relation to an interest payment due on 23 Sep which indicated it had been resolved via negotiations off the clearing house, Lucror Analytics noted that the settlement of the onshore bond coupon indicates Evergrande is actively negotiating with investors, however, the company may not be able to meet its future payment obligations.

To assuage market uncertainty, China's central bank has been injecting liquidity into the financial system with reverse repos, while the People's Bank of China is also promoting reform of the operation mode of its standing lending facility, as part of efforts to better meet reasonable liquidity needs (click here for more).

Recent Market Impacts

Expectations for China Evergrande’s road ahead are varied, given the social toll of real estate defaults, the clear mandate of policymakers to rein in the debt of China Developers, and the potential impacts to counterparties and adjacent industries. This uncertainty, coupled the decelerating growth in 2H21, have seen the top quartile of China and Hong Kong real estate stocks by market value decline 10% over the past 12 weeks. Since the share price of China Evergrande closed below its March lows on 8 July through to 23 Sep, its share price has declined 76%. Over that period, key China benchmarks generated declines in total returns, with the H-share Index declining 12%, the FTSE China A50 Index declining 9% and the FTSE ST China Index declining 6%.

The risk of a disorderly default of China Evergrande have weighed both equities and corporate bond prices, particular the China property firms that have crossed the two or three of the three red line metrics introduced last year. The subsequent volatility in China credit USD bond prices have enabled both fund managers to capture higher yields, and investors capturing potentially higher distribution yields on the back of the lower prices. China high yield bonds account for more than 40% of the portfolio of the Bloomberg Asia USD High Yield Diversified Credit Index, which is the underlying index of the iShares USD Asia High Yield Bond ETF. The AUM of this ETF has grown from US$148 million at the end of 2020 to US$646 million. Click here for more details on the ETF.

Singapore Context & Market Moves

Of the 19 FTSE ST China Index constituents, the majority have generated declines over the 12 weeks, with China Everbright Water and Tianjin Zhongxin Pharma generating gains, alongside their respective global industry indices of Utilities and Healthcare Products.

• China Everbright Water is an environmental protection company focusing on water environment management that invested in and held 143 environmental protection projects, with a total investment of approximately RMB25.75 billion as of 30 Jun. On 11 Aug the Group reported its 1HFY21 (ended 30 Jun) revenue amounted to HK$3.11 billion, representing an increase of 47% from 1HFY20, with profit attributable to equity holders at HK$548.18 million, representing an increase of 36% from 1HFY20.
• Tianjin Zhong Xin Pharma reported on 13 August its 1HFY21 (ended 30 Jun) net profit gained 42% from 1HFY20. Among the many reforms introduced in China across 2021, one of the first for the year was the State Council of China issuing Several Policies and Measures on Accelerating the Characteristic Development of Traditional Chinese Medicine. 
• China Developer, Yanlord Land is also a part of the FTSE ST China Index, and has declined 5.1% since 8 July, with the bulk of that decline attributed to the 4.3% decline since 13 Sep. On Aug 12, Yanlord Land Group reported its 1HFY21 (ended June 30) revenue increased by 44.7% from 1HFY20 to 13.19 billion yuan (S$2.7 billion), primarily attributed to the increase in gross floor area delivered to customers, which partly offset by the decrease in average selling price per square metre achieved by the group in 1HFY21 compared to 1HFY20. With the results, founder, chairman and CEO Zhong Sheng Jia noted that given the backdrop of strong economic recovery across China during the reporting period, Yanlord's development strategy of focusing on building premium developments in high-growth economic regions and cities within the country had continued to deliver business growth. Mr Zhang also acquired 6,991,400 shares of the listed company at S$1.17 per share between 17 Aug and 19 Aug (click here for more). Since 30 June, Yanlord Land Group has declined 8.2%, with just over half those declines formed since 13 Sep, trimming its 2021 to 24 Sep total return to 5.3% based on the 6.8 cents per share dividend that went ex-div on 19 May. The stock has paid a 6.8 cents dividend per year since 2018, with the S$1.12 close on 24 Sep generating an indicative dividend yield of 6.1%.
• Ying Li International and Hongkong Land which are not are part of the FTSE ST China Index, with Hongkong Land more of a 50/50 Manager/Developer have declined 2.5% and 0.9% since 13 Sep. Notably, Hongkong Land rallied 4.1% on 23 Sep, following on from the China Evergrande Group subsidiary filing the announcement as discussed above. CapitaLand Investment which debuted on Monday, and conducts business in China rallied 4.3% on 23 Sep.
• Singapore banks make up more than 40% of the STI, and DBS and OCBC both maintain more net revenue exposure to Greater China, and more loan exposure to Mainland China than UOB. This coincided some marginal outperformance of UOB, over the latter two banks going back to session prior to China Evergrande Group’s 14 Sep announcement. The nine sessions saw UOB decline 0.7%, while DBS declined 3.1% and OCBC declined 2.2%. However, as reiterated by research analysts this week, while Singapore banks do not comment on specific exposures, the Singapore banks are not listed as principal bankers in the 2020 China Evergrande Annual Report.

FTSE ST China Index Constituents	Code	Mkt Cap S$M	2021 YTD Net Insti Inflow S$M	Average Daily Turnover S$M	MTD Total Return %	QTD Total Return %	YTD Total Return %	Sector
YZJ Shipbldg SGD	BS6	5,646			-13	1	54	Industrials
Wilmar Intl	F34	25,735			-1	-8	-9	Consumer Non-Cyclicals
JMH USD	J36	49,604			-6	-19	-5	Consumer Non-Cyclicals
Nanofilm	MZH	2,806			-2	-22	-3	Technology (Hardware/ Software)
CapLand China Trust	AU8U	1,914			-3	-5	-6	REITs
Aztech Global	8AZ	836			-1	-16	-14	Industrials
Yanlord Land	Z25	2,163			-6	-8	5	Real Estate (excl. REITs)
HPH Trust USD	NS8U	2,653			10	4	26	Industrials
Sunpower	5GD	492			0	-18	3	Industrials
The Place Hldg	E27	547			-17	-29	182	Consumer Cyclicals
Sasseur REIT	CRPU	1,063			-4	-6	13	REITs
Hong Leong Asia	H22	617			-2	-13	9	Consumer Cyclicals
Valuetronics	BN2	248			-1	-1	1	Technology (Hardware/ Software)
Tianjin ZX USD	T14	3,520			-12	9	41	Healthcare
China Aviation	G92	830			0	-6	-7	Energy/ Oil & Gas
GHY Culture	XJB	623			-4	-19	-13	Consumer Cyclicals
China Everbright	U9E	858			13	22	44	Utilities
EC World REIT	BWCU	638			-2	-1	17	REITs
China Sunsine	QES	475			0	-5	1	Materials & Resources
Total
Median					-2	-6	3
Average					-3	-7	18

 Source: Bloomberg, Refinitiv, SGX (Data as of 24 Sep 2021)

Chinese real estate and property-related stocks have been dominating headlines over the past week as investors remain cautious and watch for updates.

Closer to home, there are four S-REITs which have their entire portfolio of assets in China – CapitaLand China Trust, Sasseur REIT, EC World REIT, and BHG Retail REIT.

Together the four S-Reits have generated -0.9 per cent in average price returns over the past week, comparatively to the swings of Chinese property stocks.

The Reits have averaged 8.0 per cent in total returns in the year-to-date, 6.1 per cent in average distribution yields, and an average gearing ratio of 34.1 per cent which is lower than the sector average of 37.4 per cent.

S-Reits have a regulated leverage limited of 50 per cent.

CapitaLand China Trust (CLCT) is the largest multi-asset China focused S-Reit with an expanded mandate from a pure retail Reit into a diversified portfolio of retail and business park assets since earlier this year.

Its Sponsor is CapitaLand Investment Limited, a leading global real estate investment manager, which made its trading debut on the SGX last week.

CLCT has a gearing ratio of 35.9 per cent and average term to maturity of 3.80 years, with the majority of the refinancing requirements in 2021 completed.

It has 78 per cent of its total term loans on fixed interest rates and has hedged approximately 55 per cent of its undistributed income to reduce foreign currency fluctuations.

Sasseur Reit operates four outlet malls located in Chongqing, Bishan, Hefei and Kunming and is Asia's first outlet mall Reit.

The Reit has a gearing ratio of 27.8 per cent which is the lowest across the S-Reits sector and sees this as providing ample debt headroom for potential acquisitions.

Sasseur Reit has an average debt to maturity of 1.7 years and an interest coverage ratio of 4.5 times as at June 30, 2021 which has improved from 4.0 times in Dec 31, 2020.

Its weighted average cost of debt reduced to 4.4 per cent per annum for H1 2021, from 5.3 per cent per annum in H1 2020.

EC World Reit has a diversified portfolio of assets used primarily for e-commerce, supply-chain management and logistics purposes in the e-commerce clusters of Hangzhou and Wuhan.

The Reit has a gearing ratio of 37.6 per cent, weighted average debt maturity of 1.13 years and interest coverage ratio of 2.86 times.

The Reit manager has expressed in its latest financial results that it will continue to actively explore and diversify sources of funding and hedging instruments to optimise its capital structure.

BHG Retail Reit has a diversified portfolio of six retail properties in Beijing, Chengdu, Hefei, Xining and Dalian. It has a gearing ratio of 34.9 per cent.

BHG Retail Reit has an average cost of debt at 3.7 per cent and interest coverage ratio of 2.6 times.

Over 80 per cent of its borrowings are denominated in Singapore dollars and US dollars and about 60 per cent of offshore loans are hedged via interest rate swaps. 

REIT Watch is a weekly column on The Business Times, read the original version.

The annual Singapore Governance and Transparency Index (SGTI) assesses Singapore-listed companies on their corporate governance disclosure and practices, as well as the timeliness, accessibility and transparency of their financial results announcement, so as to provide investors with greater transparency and accountability.

The SGTI is a collaboration among CPA Australia, NUS Business School's Centre for Governance and Sustainability, and the Singapore Institute of Directors, supported by The Business Times.

The SGTI 2021, which assessed companies based on their annual reports for Financial Year 2020 released by June 15, 2021, is divided into two categories - general category (519 companies) and the Reits and business trusts category (43 trusts).

The mean overall scores of both categories reached all-time highs of 68.7 (general category) and 85.0 (Reits and business trusts category) respectively.

In the REITs and Business Trusts category, Ascott Residence Trust moved up from third place last year to claim the top rank with an overall score of 115.3.

Far East Hospitality Trust, which scored 113.8 points, moved up two positions to second place and Ascendas REIT jumped from eighth place to enter the top three with 111.1 points.

In the SGTI 2021 press release, it was noted that these trusts had done well in sustainability management and in disclosing policies on the amount of funds they could borrow to invest for higher returns.

In addition, they have a minimum of three full-time key representatives who each has at least five years of experience relevant to Reit management.

The mean overall score of the Reits and business trust category increased by 0.2 point year on year and the bonus points for good disclosure practices increased by 1.3 points to 18.5 points.

One example of good disclosure, given in the press release, is disclosing information on the succession planning for the board and senior management.

The proportion of companies that disclosed this information increased from 6.7 per cent in 2020 to 30.2 per cent in 2021.

On the other hand, the SGTI press release noted that penalties for poor disclosure practices, such as discrepancies in corporate announcements, increased by 0.1 point to 5.1.

The proportion of REITs and Business Trusts that received penalty points stood at 9.3 per cent, compared to 4.4 per cent a year ago.

The top 5 REITs and Property Trusts with the most year-on-year improvements in overall scores include: Ascendas India Trust (+22.8 points), Mapletree Commercial Trust (+19.4 points), Ascendas REIT (+16.7 points), ParkwayLife REIT (+15.1 points) and Frasers Logistics & Commercial Trust (+14.9 points).

REIT Watch is a weekly column on The Business Times, read the original version.

• Singapore’s 150 most traded stocks in the 2021 YTD have made up the lion’s share of day-to-day turnover, which includes 22 stocks that have seen a greater than 10-fold increase in daily turnover in the 2021 YTD from 2020. This includes 11 stocks listed on the Mainboard, and 11 stocks listed on Catalist.
   
• Last week, Del Monte Pacific, the largest of the relevant 11 Mainboard stocks by market value, reported a 1QFY22 (end 31 Jul) turnaround net profit of US$18.3 million. The company also ended its FY21 on a stronger note reporting back on 23 June an FY21 turnaround net profit of US$63.3 million, reversing the US$81.4 million loss in FY20.
   
• Last week, Grand Venture Technology’s proposed placement of up to 25 million new shares on Catalist received approval in-principle from SGX. The largest of the relevant 11 Catalist stocks by market value, the homegrown manufacturing solutions and services intends to undertake a transfer of listing to the Mainboard.
   
• While the 22 stocks generated a median total return of 93% in the 2021 YTD, the comparatively higher return of the 22 stocks over the past 36 weeks was matched by higher risk, with the 22 stocks also generating a median 180 day historical volatility of 93%.
   

Global concerns of deaccelerating economic growth have mounted since the end of June, with global stocks gaining 2.0% over the 10 weeks, whilst Asia Pacific stocks, including the STI, have generated 0.2% gains. Since June, Mining, Utilities, Technology, Healthcare Products and Basic Materials have been among the stronger industries of the market, while segments such as Lodging, Food Services, Leisure, Airlines and Transport have been among the lesser performing. Beyond the benchmarks and sector performances, multiple Singapore stocks have been propelled into the most 150 traded stocks this year on the back of a surge in trading turnover. 

Singapore’s 150 most traded stocks in the 2021 YTD contributed more than 95% of the day-to-day turnover of all stocks listed on SGX. Among the 150 stocks, 22 stocks have seen a more than 10-fold increase in daily turnover in the 2021 YTD from 2020. This includes 11 stocks listed on the Mainboard, and 11 stocks listed on Catalist. The Sectors most represented by the 22 stocks include the Industrial Sector, with six stocks, while four stocks represent the Consumer Cyclical Sector while the Energy, Basic Materials Sector and Real Estate (excl. REITs) were each represented by three stocks.

While the 22 stocks generated a median total return of 92.9% in the 2021 YTD, the comparatively higher return of the 22 stocks over the past 36 weeks was matched by higher risk, with the 22 stocks generating a median 180-day historical volatility of 93.0%. The 22 stocks that have seen a greater than 10-fold increase in daily turnover in the 2021 YTD from 2020 are tabled below and sort by the highest turnover growth.

Stocks Among 150 Most Traded in 2021 YTD with More than 10-Fold Increase In Trading Turnover from 2020	SGX Code	Mkt Cap S$M	2021 YTD Average Daily Trading Turnover	Trading Turnover Growth (x)	2021 Net Insti Inflow S$M	MTD Price Change %	QTD Total Return %	YTD Total Return %	180 Day Volatility %	Board
OIO	KUX	119.3	$929,835	20511	1.1	-6.3	189.1	241.0	268.0	CATALIST
RH Petrogas	T13	101.5	$1,213,199	631	-1.1	4.6	-17.0	448.0	174.9	MAINBOARD
Mercurius	5RF	108.8	$1,050,520	529	2.8	110.3	7.9	241.7	136.2	CATALIST
LHN	41O	132.9	$1,060,568	95	0.7	0.0	-15.8	86.3	66.2	CATALIST
Kim Heng	5G2	64.3	$592,650	50	0.2	13.8	-1.1	184.4	109.8	CATALIST
Fortress Minerals	OAJ	222.5	$791,610	47	-0.9	-11.9	-29.4	50.8	75.8	CATALIST
Samudera Shipping	S56	337.0	$615,484	34	-1.1	17.9	66.3	161.4	45.2	MAINBOARD
Golden Energy	AUE	753.0	$566,700	31	-0.1	3.2	10.3	98.8	68.8	MAINBOARD
CFM	5EB	51.4	$1,571,940	24	1.8	4.1	-16.4	537.5	159.3	CATALIST
Grand Venture	JLB	394.5	$612,248	23	5.0	4.9	43.1	292.5	55.4	CATALIST
The Place Hldgs	E27	658.6	$2,540,821	23	2.9	0.0	-14.5	239.4	96.6	MAINBOARD
VCPlus	43E	109.2	$599,753	21	3.8	0.0	0.0	257.1	129.5	CATALIST
China Star Food	42W	22.1	$583,115	14	0.6	13.6	-13.8	25.0	105.1	CATALIST
Leader Env	LS9	121.3	$1,335,031	14	-1.1	5.3	-27.1	9.8	89.5	MAINBOARD
Del Monte Pac	D03	758.1	$702,957	13	5.7	11.4	5.4	106.9	51.7	MAINBOARD
Hong Fok	H30	675.7	$1,218,681	12	-6.3	0.6	-3.6	9.4	39.3	MAINBOARD
FJ Benjamin	F10	27.8	$502,099	12	0.3	4.0	-23.5	73.3	134.5	MAINBOARD
InnoTek	M14	193.3	$1,123,454	12	-0.3	5.0	-11.5	50.2	36.4	MAINBOARD
MM2 Asia	1B0	125.6	$1,313,276	12	6.9	-3.6	-20.6	-52.0	79.0	MAINBOARD
Tuan Sing	T24	588.8	$1,637,655	12	3.8	-2.0	-2.0	57.8	38.1	MAINBOARD
Metal Component	5DX	20.6	$610,897	11	-1.5	13.2	-27.1	87.0	152.7	CATALIST
Koh Eco	5HV	149.3	$715,921	11	-1.2	12.8	-11.7	71.0	122.4	CATALIST
Total		5,735.6	$21,888,415		22.1
Average						9.1	4.0	149.0	101.6
Median						4.3	-11.6	92.9	93.0

Source: SGX, Refinitiv, Bloomberg (Data as of 10 September 2021). While the 22 stocks make up 0.6% of the total market value of all stocks listed on SGX, they have contributed 1.7% of the 2021 YTD trading turnover of all stocks listed on SGX.

The current market value of the 22 stocks ranges from S$758 million for Del Monte Pacific, to S$21 million for Metal Component Engineering. On 9 Sep, Del Monte Pacific reported 1QFY22 (ended 31 Jul) EBITDA of US$75.0 million, a 77% YoY increase from US$42.4 million with net profit reaching US$18.3 million.

• This reversed the US$3.2 million loss in 1QFY21. Del Monte Pacific also ended the last FY on a stronger note – reporting back on 23 June an FY21 turnaround net profit to US$63.3 million, reversing the US$81.4 million loss in FY20. In 1QFY22, the Group noted it significantly improved its margins by 600 basis points to 28.9% from better sales of higher-margin branded products in the US and lower costs.
• The Group’s second largest and most profitable subsidiary, Del Monte Philippine’s, saw its international market sales for the July ending quarter rise 40% YoY to US$67.8 million on robust sales of Packaged Fruit and Beverages including premium packaged pineapple (Del Monte Deluxe Gold) in the US, and S&W packaged products in Asia.
• For its outlook the Group maintained it is well-positioned to build on the momentum achieved in FY21 and expects to offset the impact of commodity and transportation headwinds and barring unforeseen circumstances, the Group expects to generate higher net profit in FY22. Del Monte Pacific is 71%-owned by NutriAsia Pacific Ltd and Bluebell Group Holdings Limited, which are beneficially-owned by the Campos family of the Philippines.

Of the 11 Catalist-listed stocks tabled above, Grand Venture Technology maintains the highest market value. The stock has generated a 292.5% total return in the 2021 year to 10 Sep, and was recipient to a similar level of net buying by institutions seen by Del Monte Pacific over the 36 weeks.

• On 3 Sep, Grand Venture Technology proposed a placement of up to 10 million vendor shares and up to 25 million new shares on Catalist, with the latter receiving approval in-principle from SGX on 8 Sep. With a placement price of S$1.14 per share, the proceeds will build on the competencies, customer base, and capacity scale of the homegrown manufacturing solutions and services provide that serves semiconductor, analytical life sciences, electronics and other industries.
• Furthermore, in-line with the company’s intention to undertake a transfer of listing to the Mainboard, as announced on 1 Sep, the placement also allows the company to increase its share trading liquidity, public float and shareholder count.
• Back on 10 Aug, Grand Venture Technology reported a 282.7% YoY surge in its 1HFY21 (ended 30 June) net profit to S$8.5 million, while also declaring its maiden dividend.

Catalist-listed OIO Holdings saw the greatest increase in trading turnover in the 2021 YTD from 2020. The core business units of OIO Holdings are blockchain technology services and mechanical and engineering services.

• The group’s blockchain arm aims to expand blockchain technology and accelerate its integration by offering B2B consulting and software development services to various industries.
• Following the acquisition of Moonstake Pte Ltd in May 2021, OIO Holdings extends its business beyond the corporate level by providing digital wallets and staking solutions.
• Back on 12 Aug, OIO Holdings reported for its 1HFY21 (ended 30 June), revenue increased 142% YoY of S$1.6 million, on the back of 276% jump from the blockchain business segment. The company noted that despite achieving a gross profit of S$1.2 million during the period under review, it recorded a net loss of S$0.6m, mainly attributed to items from the new blockchain business segment – namely promotional expenses incurred, non-cash impairment due to the weaker crypto market in June and higher staff related costs.
• On 9 Sep, OIO Holdings proposed a subscription for 894,841 new ordinary shares in the capital of the company, representing approximately 0.5% of the issued shares of the company, at an issue price of S$0.601 for each subscription share, amounting to an aggregate gross consideration of US$400,000 (S$537,800). The proposed subscriber is Mr Makoto Matsuoka who is in the business of the construction and real estate industries in Japan, and an acquaintance Mr Mitsuru Tezuka, a substantial shareholder of the Company.

ASCOTT Residence Trust Ascott Trust: HMN -0.51% (ART) announced last week that it will acquire a student accommodation property in Texas, in the United States, which will be its third student accommodation asset investment this year.

While ART may be the first Singapore-listed trust to venture into student housing as S-Reits continue to diversify across property sub-segments, there are other Singapore-listed companies such as Singapore Press Holdings SPH: T39 +1.03% , Far East Orchard Far East Orchard: O10 -3.64% , Centurion Corporation Centurion: OU8 0% , Wee Hur Wee Hur: E3B 0% , and Metro Holdings Metro: M01 0% that invest, own, and manage purpose built student accommodation assets (PBSA).

According to Knight Frank, global investments in PBSA reached a record US$16.3 billion in 2018.

Savills considers the PBSA sector to be counter-cyclical and notes in a report that it was one of the few asset classes that showed resilience during the global financial crisis in 2008.

In addition, data collated by Jones Lang Lasalle (JLL) has shown that over a third of deals for student housing in 2021 so far have been by private equity firms, as investors continue to seek exposure to alternative real estate sectors.

ART's most recent acquisition is a freehold 1,005-bed student accommodation asset in Lubbock, Texas, for S$93.8 million. Wildwood Lubbock is a cottage-style property that is fully leased for the 2021 academic year and serves over 40,000 students from Texas Tech University.

The trust expects the acquisition to increase its pro forma FY2020 distribution per stapled security by approximately 1.5 per cent.

It also notes the longer average leases of student housing at one year, versus hotel stays.

ART has acquired four longer-stay accommodation assets this year, after expanding its strategy and diversifying its portfolio from traditional hospitality assets, further increasing its resilience and stable income.

Its two other student housing assets are in Atlanta (acquired in February 2021 for S$126.3 million) and South Carolina (acquired in June 2021 for S$73.4 million), both in the US.

In June 2021, ART also acquired three rental housing properties in Sapporo, Japan for S$85.2 million.

Following the acquisitions, ART's rental housing and student accommodation properties will comprise about 11 per cent of its portfolio value, up from 5 per cent in end 2020. It has a medium-term target to expand it to 15 to 20 per cent.

CDL Hospitality Trust CDL HTrust: J85 -0.85% (CDLHT) in July this year has announced that it is revising its principal investment strategy to include rental housing, student accommodation and senior housing assets.

The trust sees the revision of its strategy as a way to bring more diversification to its portfolio, enhance income stability as tenants typically have longer lengths of stay compared to hotels, and expand its range of investment opportunities given its broader mandate.

Singapore Press Holdings (SPH) has a portfolio of 28 PBSA assets in the UK with a total of 7,723 beds under its brands Capitol Students, Student Castle, and Galileo Residenz.

Far East Orchard owns a PBSA portfolio in the UK comprising over 3,500 beds in the cities of Brighton, Bristol, Leeds, Liverpool, Newcastle-upon-Tyne and Sheffield.

Centurion Corporation has a PBSA segment with 19 assets in Australia, South Korea, the UK and US that accounted for 25 per cent of its revenue in H12021.

Wee Hur Holdings' PBSA business is undertaken via two of its funds which manage two operational assets, one asset pending operations and the rest at various stages of development.

Metro Holdings' PBSA portfolio consists of two properties in Warwick and Bristol, in the UK, and a 7.3 per cent investment in the Mapletree Global Student Accommodation Private Trust. 

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• A recent Morningstar study found expense ratios for fund investors (consisting of management fees and the continuing costs of owning fund units) have halved in two decades from 0.93% of the total amount invested in all funds in 2000, to 0.41% in 2020.

• As many as 12 of Singapore-listed ETFs currently maintain expense ratios below 0.41%, with seven ETFs investing in fixed income markets with an average expense ratio of 0.26%, four ETFs investing in equities, with an average expense ratio of 0.22%, and the SPDR Gold ETF with a 0.40% management fee.

• Of the 12 ETFs, the three that have seen the highest inflows in the 2021 YTD include the ICBC CSOP FTSE Chinese Government Bond ETF, the ABF Singapore Bond Index Fund and the Nikko AM Singapore STI ETF, with combined inflows of S$480 million.  

A recent Morningstar report found that asset-weighted average expense ratios of funds have halved in two decades from 0.93% of the total amount invested in all funds in 2000, to 0.41% in 2020. The report also found that low-cost funds generally have greater odds of surviving and outperforming their more-expensive peers. As noted by Morningstar Director Ben Johnson, while the asset-weighted fund fees declined from 0.44% in 2019 to 0.41% in 2020 might not sound like much, it amounted to $6.2 billion in savings for fund investors. The fee declines have coincided with a proliferation of global ETF & ETP assets, which according to independent research and consultancy firm ETFGI, reached a record US$9.5 trillion at the end of July. Back in 2005, global ETF & ETP Assets totaled less than US$500 million.

As many as 12 of the 30 Singapore-listed ETFs currently maintain expense ratios below 0.41%, with seven ETFs investing in fixed income markets with an average expense ratio of 0.26%, four ETFs investing in equities with an average expense ratio of 0.22%, and the SPDR Gold ETF with a 0.40% management fee. The 12 ETFs, with a combined AUM of S$7.9 billion are tabled below.

ETF Name	Prim Code	Sec Code	Issuer	Fund Focus	Total Expense Ratio (%)	AUM S$M	YTD Inflow S$M	YTD Total Return %
SPDR S&P 500 ETF	S27		SPDR	US Equities	0.09	64.7	13.8	24.3
SPDR®  DJIA ETF TRUST	D07		SPDR	US Equities	0.17	4.1	0.0	19.5
Xtrackers II Singapore Government Bond UCITS ETF	KV4		Xtrackers	Singapore Bonds	0.20	130.8	-1.6	-3.0
Phillip SGD Money Market ETF	MMS	MMT	Phillip	SGD Money Market	0.24	116.1	-4.6	0.2
ICBC CSOP FTSE Chinese Government Bond ETF	CYC	CYB	CSOP AM	China Bonds	0.25	1,935.0	331.3	6.3
ABF Singapore Bond Index Fund	A35		Nikko AM	Singapore Bonds	0.25	1,046.3	83.7	-3.7
SPDR® Straits Times Index ETF	ES3		SPDR	Singapore Equities	0.30	1,651.9	-85.0	11.1
Nikko AM SGD Investment Grade Corporate Bond ETF	MBH		Nikko AM	Singapore Bonds	0.30	597.0	7.9	-0.1
Nikko AM Singapore STI ETF	G3B		Nikko AM	Singapore Equities	0.30	580.7	64.9	10.9
NikkoAM-ICBCSG China Bond ETF SGD Class	ZHS		Nikko AM	China Bonds	0.30	59.4	14.0	6.0
NikkoAM-ICBCSG China Bond ETF RMB Class	ZHY	ZHD	Nikko AM	China Bonds	0.30	232.3	0.6	5.9
iShares Asia Credit ETF	N6M	QL2	Blackrock	Asia Ex-Japan Bonds	0.30	103.9	21.7	2.9
SPDR GLD ETF	O87		SPDR	Gold	0.40	1,407.4	-78.6	-2.2
Average								6.0
Total						7929.6	368.2

 Source: SGX (Data as of 6 September 2021)

 

Of the 12 ETFs tabled above, the three that have seen the highest inflows in the 2021 year to date, include the ICBC CSOP FTSE Chinese Government Bond ETF, the ABF Singapore Bond Index Fund and the Nikko AM Singapore STI ETF. As noted in the ICBC CSOP FTSE Chinese Government Bond ETF prospectus the management fee of the ETF is currently 0.25% per annum of the NAV, with a set maximum of 0.30% per annum of the NAV. The management fee consists of custodian fees and other fees and charges that include fund administration and valuation fees, audit fees, accounting fees, licensing fees, corporate secretarial fees, printing costs, out-of-pocket expenses and director fees.

The ICBC CSOP FTSE Chinese Government Bond ETF, the ABF Singapore Bond Index Fund and the Nikko AM Singapore STI ETF have averaged 4.5% total returns in the 2021 year to 6 Sep. Calendar year returns for portfolios weighed 50/50 to the ABF Singapore Bond Index Fund and the Nikko AM Singapore STI ETF at the beginning of each of the past five years ranged from -2.5% in 2018 to 12.5% in 2017.

The ICBC CSOP FTSE Chinese Government Bond ETF which was listed for trading in Singapore in Sep 2020, adopts a representative sampling method to replicate as closely as possible, before fees and expenses, the performance of the FTSE Chinese Government Bond Index. This Index measures the performance of fixed-rate government bonds issued in China, which includes fixed rate book entry government bonds issued in China and excludes zero coupon bonds, saving bonds, bonds with maturity greater than 30 years from issuance, and bonds issued prior to 1 Jan 2005.

The average yield to maturity of the ICBC CSOP FTSE Chinese Government Bond ETF Holdings is presenting 2.7%. The Yield to Maturity (YTM) represents the discount rate that equates the present value of a bond’s cash flows with its market price (including accrued interest). The Fund Average YTM is the weighted average of the fund’s individual bond holding based upon NAV, and does not include the fees and expenses. The ICBC CSOP FTSE Chinese Government Bond ETF has made two distributions, since its listing with the annualised trailing distribution yield at 2.8%.

As estimated by a recent BIS Working Paper No 949, the natural real interest rate in China averaged 3-5% between 1995 and 2010, but had subsequently declined to ‘a bit above 2% as of the end of 2019’, mirroring developments in advanced major economies. The FTSE Chinese Government Bond Index and FTSE Singapore Government Bond Index have also maintained a simple 85% correlation in daily moves over the past five years. However, differences in the inertia of expectations, growth and interest rate polices have provided a tradable aspect to the passive fixed income ETFs. Such factors saw the price ratio spread of the FTSE Chinese Government Bond Index to the FTSE Singapore Government Bond Index move from two standard deviations below its 3-year mean in August 2020 to two standard deviations above its 3-year mean in July 2021. This meant that the ICBC CSOP FTSE Chinese Government Bond ETF outpaced the Xtrackers II Singapore Government Bond UCITS ETF by as much as 12.0% from its 21 Sep 2020 debut through to 12 Aug 2021. 

ETFs are investment funds listed and traded intraday on a stock exchange. The majority aim to track the performance of an index and provide access to a wide variety of markets and asset classes, including local stocks, international securities, bonds, commodities or money markets. As with other securities, ETFs maintain market risks with the underlying index tracked by the ETF susceptible to market volatility. Changes of market conditions can affect the price of the underlying, which constitutes the NAV of the ETF, leading to a change in price of the ETF. To find out more about ETFs, click here.