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These 4 REITS Can Cause STI To Lose 8 Percent Overnight!
Ask an investor what were the stocks that have risen over the past few years, the answer would probably yield a four-letter word: REIT!
In a note released by the Singapore Exchange (SGX) on 23 September, the Straits Times Index (STI) generated a 6.6% total return, in-line with the preceding 9.2% average annualised total returns of the preceding 10 years.
The Index consists of 30 of Singapore’s largest capitalised, most actively traded stocks, with constituents periodically rebalanced to take into account comparative changes in capitalisation and activity. We note that the Dow Jones Industrial Average (DJIA) and the Hang Seng Index (HSI) are very rarely changed. We do stand corrected on this.
The SGX made a few changes with Mapletree Commercial Trust (MCT) joining the STI, Mapletree Industrial Trust (MIT) joining the STI Reserve List, Frasers Centrepoint Trust (FCT) and Keppel DC REIT join the FTSE EPRA/NAREIT Global Real Estate Index Series. Meanwhile Frasers Logistics & Industrial Trust (FLT) joins the GPR 250 Index Series.
Too many different indices to track? We think so too but fund managers need these indices to track their performances, we suppose.
MCT will now have an approximate STI weighting of 1.5 percent, which means that the STI would lose 1.5 percent of its total value if this company was to vanish overnight. Touchwood!
The situation would be worse if Ascendas REIT, CapitaLand Mall Trust, CapitaLand Commercial Trust and MCT were to vanish overnight. An approximate 8 percent of STI would be lost. Touchwood again.
We can touch all the wood we want but we are dead sure that these stocks are not the penny stocks that vaporised into thin air on 4 October 2013.
Kudos To MCT! Huat Ah!
As at 31 March, MCT’s five properties – VivoCity, MBC I, PSA Building, Mapletree Anson and MLHF – maintained a combined portfolio value of $7.0 billion. This super REIT, which has jumped three folds since its IPO in 2011, reported DPU for 1QFY19/20 (ended 30 June) that grew 3.6 percent YoY.
Where got three folds, you ask? Have! From the IPO through to 30 June 2019, MCT had returned investors 210.6 percent, consisting of 137.5 percent in capital appreciation gains and 73.1 percent in distribution gains based on total distributions of 64.37 cents paid out.
MIT On Reserve List
At the same time, more action on the REIT front! Mapletree Industrial Trust (MIT) has joined the STI Reserve List, which means that it is most likely to be the next to join the STI if there is an injury to a player (We’re thinking football!).
The five stocks on the STI Reserve List are now as follows:
Mapletree Logistics Trust
Suntec REIT
Mapletree Industrial Trust
Keppel REIT
Mapletree North Asia Commercial Trust
On 17 September, MCT was still trading as low as $2.13 but savvy investors who had the crystal ball bought and bought and bought till the shares surged as high as $2.32 on 24 September – 9 percent gain in a week provided one had bought at the low and sold at the high.
Next time when we hear from the media or anywhere that a stock would soon be included in the Straits Times Index, buy it as early as you can. Fund managers would need to buy up these stocks because their funds need to track the performance.
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