The articles in the blog are intended for informational purposes only, with the aim of encouraging thoughtful discussions. The articles should not be relied upon as financial advice. Please read the important disclaimer at the bottom of the page before proceeding.

Another Volatile Week Ahead

Just a short post on a Monday morning to kick off the week.

Transactions during the week of 16 - 20 March

Bought Mapletree Commercial Trust (MCT) at $1.70, with the intention of holding for the long term and collection dividends. However, its share price shot up to a high of $1.92 the next day, and I felt that in this market, such a strong bounce was too compelling to ignore, and I sold at $1.88. That would have been the equivalent of collecting two years of dividends in a single day. My current perspective for holding my dividend stocks would be that once the capital gains exceeds x number of years' worth of dividends, then I would be better off selling the stock to lock in my gains.

An example would be my investment in UOL - I bought it back in 2018 at $6.85 - at that point of time, it was yielding around 2.5%. Over the next year and a half, the price hit a high of around $8.50 early this year - a capital gain that amounted to almost 10 years of dividends, assuming the payout remains constant. But I didn't sell, and currently I'm sitting on a small capital loss.

Bought Lion-Philip S-Reit ETF at $0.864. The recent sell-off has pushed prices of REITs to incredibly low levels, with some REITs that were once viewed as 'quality' declining in double digit percentages in a single day - FLT and Manulife being examples. Many REITs are now yielding in excess of 10%. I bought the ETF instead to get broad exposure to the REIT sector - I still believe that the business model is good - but the next few months would be challenging for REITs.

My personal opinion is that there is a likelihood of REITs having to raise equity capital to shore up their balance sheets, similar to what unfolded in 2009. I have written a more detailed post on REITs during the Global Financial Crisis here:

In fact, the storm has already begun, with Eagle Hospitality Trust announcing that it is considering a 'strategic review' to 'unlock value and create liquidity'. EHT's share price had been under significant pressure and it would not have made sense for them to raise further equity through a rights issue, and they were also unlikely to have been able to drawdown further loans from banks in these challenging conditions.

Hence, it may be possible that in the near future, certain REITs may breach their debt covenants during these challenging operating conditions (Interest Coverage Ratio etc), and banks may tighten liquidity. Coupled with the possibility of negative revaluations on their properties, REITs may have to turn to shareholders to raise equity capital to strengthen their balance sheets. Therefore, my purchase of the ETF is to gain broad exposure to the REIT sector - without having to attempt to identify which REITs would proceed with rights issues that may put further pressure on prices - the ETF manager would rebalance the portfolio accordingly.

I have also transferred funds into my FSMOne account, with the intention of purchasing US/HK equities and ETFs. Some names I'm looking at include Microsoft, Facebook, Visa/Mastercard and the Tracker Fund of HK.

Thoughts on COVID-19

I would like to use this platform to share my personal opinion on this issue.

Personally, I feel that many Singaporeans have been too complacent of late. People are still going out as per normal, and I've even come across people saying that social distancing should only be practiced during DORSCON Red.

My simple question would be: What makes us think that we're better than the world? Across the globe, schools are closed and cities are in lockdown. Yet, only around half my classes in university have gone online, and I still have to travel by public transport twice a week. Is it that difficult to cancel classes for university students? 

Just to be clear - I am not asking for a complete lockdown here - I understand the detrimental effects on the economy, and the impact on disadvantaged groups. However, is it too much to ask that people stay home and only go out for essential purposes? I still see friends having hotpot dinners or going for drinks at a bar. Personally, I enjoy karaoke sessions, but even that has been put on hold for the past month, and I've only went out for dinner twice. Everyone has to do their part - just stay home - it isn't that difficult...

The virus doesn't care about nationality or race - healthcare workers are putting their lives on the line for us - yet a good number of people still hold the perspective that 'the risk of infection is low' or 'I'm relatively young so it won't affect me much'. That is utterly irresponsible; staying home isn't about you, it's about your family and friend's safety as you could be an asymptomatic carrier.

Please pass this message along if you share similar thoughts.

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Please note that these articles are for discussion and informational purposes only and should not be relied upon as financial advice. Readers should consult their licensed financial advisers before making investment decisions. Please read the full disclaimer available on the desktop version of my blog.

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