Skip to main content
Weekly Outlook

Weekly Outlook for 01 November 2021 – 07 November 2021

Weekly Commentary: 01 November 2021 – 07 November 2021

As can be seen below, positive gains from most of the major indices for four consecutive weeks. Growth stocks as loosely represented by the NASDAQ Composite Index led the big three indices with a 2.72% weekly gain while the S&P 500 and the DJIA trailing behind with a 1.35% and 0.40% increase each. Both Hang Seng and STI reported negative returns of -2.87 and -0.22%. Overall market sentiment is still strong although the global HY-IG spread expanded slightly to 2% and CBOE Volatility Index (VIX) rose by 66 bp to 16.26%. Both are still below their 30-day moving average of 2.02% and 19.01% respectively. Most of the S&P 500 sectors also delivered positive returns with the exception of Communication Services (-1.71%). Materials (+1.31%) and InfoTech (+0.12%) in addition made up the bottom three sectors for the week. In the other hand, the best performing sectors were Real Estate (+2.9%), Consumer Discretionary (+2.69%), and Healthcare (+2.39%).

The yield curve the flattened as the U.S. 2-year Treasury yield maintained at 0.48% and 10-year fell by 11 bp to reach 1.55%. The 10Y-2Y US Treasury yield spread dropped to 1.07% by Friday. The drop in longer-term yield seemed to be the major contributor of growth and Real Estate stocks outperformance last week. Inflation is worrying and lying on a level not seen since the global financial crisis in 2008. The Consumer Price Index published monthly by the U.S. Bureau of Labor Statistics (BLS) indicated that the inflation rate by the end of September was back at 5.4% after dropping slightly to 5.3% in August. Furthermore, the Fed’s officials seemed to be divided on hiking the interest rate and the view of a transitory inflation from its September meeting minutes.

Positive returns from global REIT markets with the exception of Australia, HK, France, and Germany. But the 12-month yield spreads are positive overall as well and still favorable towards REIT’s forward total return. Back at home, the iEdge S-REIT Index returned 1.14% with mostly positive returns from the S-REITs sectors – Healthcare (+2.55%) and Office (+2.1%) delivered the best weekly gains while Hospitality (-0.01%) and Industrial (+1.04%) lagging behind. Hospitality underperformance was largely reactionary to Frasers Hospitality Trust (-4%) FY21 results released last week that reported earnings slowdown year-on-year.

The 7-day moving average of total COVID-19 cases rose to 3777 from 3413 of the previous week, reaching over three times the peak last year. Although virus development and the pace of recovery going forward will dictate the rebound, S-REITs in the Hospitality, Office, and Retail segment are great investment opportunity for investors today. Most are undervalued In terms of Price-to-BV and Price-to-NAV due to the current uncertainty in the market, The long-term outlook remained positive as the Singapore Government has also reiterated its plan to stay connected to the world with effective safeguards and border restrictions going forward. This includes the vaccinated travel lanes (VTLs) that currently available for nine countries – Canada, Denmark, France, Germany, Italy, the Netherlands, Spain, the United Kingdom, and the United States, and are to be extended to three additional countries from mid-November onwards – Australia, Switzerland, and South Korea. VTL quota of 3,000 travellers daily will be increased as well to 4,000 daily. These are overall good news and will be a boost to the sectors still in recovery from the pandemic.

Globally, REIT is the best inflation-adjusted asset classes for the past 20 years (6.4% total return CAGR vs stocks’ 5.5%). US-REIT dividend growth have outpaced annual inflation rate as measured by the Consumer Price Index except in 2002 and 2009 (shortly after the GFC). In Singapore, the iEdge S-REIT Index has returned 6.4% annualised for the past ten years in contrast to the average core inflation rate of 1.32%, outperforming the STI’s 3.5%.

Important Information

This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.

An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.

Investments are subject to investment risks including the possible loss of the principal amount invested, and are not obligations of, deposits in, guaranteed or insured by PCM or any of its subsidiaries, associates, affiliates or PDs. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved. Any use of financial derivative instruments will be for hedging and/or for efficient portfolio management. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products. The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <> for more information in relation to the dividend distributions.

The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.

The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. This advertisement has not been reviewed by the Monetary Authority of Singapore.

Leave a Reply