Soilbuild Business REIT went underwater on its trading debut last Friday, despite being 5.4 times oversubscribed. It ultimately closed at $0.715, down 8.3% from its IPO price of $0.78.
 
According to Bloomberg, a reason for the disappointing performance could be because investors are worried about rising interest rates. Fitch Ratings previously said in March that “property trusts in Singapore face refinancing risks when borrowing costs rise, which may force them to sell assets or shares to boost their funding”.

Fed gives investors jitters
The MSCI Asia Pacific index fell for the fourth consecutive day on Tuesday and ended 1.6% lower for the day. This came amid fears that the US central bank may curtail the loose monetary policy which has boosted stock prices worldwide. Tonight, investors will be focusing on the minutes from the July FOMC which might reveal something about the fate of the quantitative easing.
 
The Chicago Board Options Exchange Volatility Index (VIX) jumped 5.1% on Monday and closed above 15 for the first time since 3 July. The index closed at 14.91 last night. In times of uncertainty, investors can consider looking at defensive stocks which have shown to add stability in times of volatility.
 
SingTel and Starhub – ‘Outperform’
Local telecos SingTel and Starhub announced earnings this month and Macquarie Equities Research (MER) gave the two companies an ‘Outperform’ rating.
 
Singtel announced 1Q14 net profit last Wednesday which increased 7% yoy. CEO Ms Chua Sock Koong said that “it was a strong quarter” and that their “business remains strong with the company continuing to execute their strategy to deliver long term growth”. MER gave SingTel a 12-month target of $4.57. The price target is 23.8% above the company’s closing price yesterday.
 
Starhub reported earnings a week before its rival, SingTel, on 6 August. Its earnings showed that net profit rose 16% yoy. CEO Mr Tan Tong Hai is happy with the jump in earnings and maintains that the Group’s operating revenue will continue “to grow in the low single-digit range”. This is “based on the current outlook and barring any unforeseen circumstances”. MER has a 12-month target of $4.50, which is a 7.7% increase from yesterday’s closing price.

Source: Macquarie Research - 21 Aug 2013