Word has spread around of a new REIT ETF which has been launched for IPO just last week and closed on 13th October 2016. The ETF will begin trading in the market this Thursday 20th October 2016.
REIT has been an all time favourite for Singaporeans as it provides higher than average dividends which is quite a good dividend income for many people. With the new REIT ETF, it will be easier to diversify between different stocks instead of being concentrated with just a few REITs in our portfolio.
Phillip Capital invited some bloggers for a dinner and Q&A session on this new REIT ETF just last week. I was there as well to find out more information on this interesting development in Singapore. As we know, investing in funds, such as unit trusts, have high costs that comes with it. However, for ETFs, the cost is relatively lower which makes a difference in our investment returns.
Understanding more on the Phillip SGX APAC Dividend Leaders REIT ETF
Let me list down some of the details as well as the pros and cons of this REIT:
REIT ETF focuses on Australian properties
The first thing that caught my attention for the REIT ETF is the concentration of properties in Australia. 59% of this REIT index consists of Australian properties with 30% in Singapore and 11% in Hong Kong.
Here are the constituents of the index:
As we can see, the REIT index consists of 30 stocks with the focus on Australian stocks.
Pros of investing in the REIT ETF
I asked the Managing Director of Philip Capital why the choice to put more emphasis on Australian REITs and he gave some reasons for it which I will share below.
Here are the reasons:
- Australia Economy has not seen a recession for the past 25 years
- Australia shopping malls are crowded with good occupancy rates
- Gearing ratio is low at 30% or less
- Rental reversion is positive
- AUD currency has gone down and is somewhat at the bottom now
- Strong GDP growth of average 3%
- High productivity growth in the country
- Focusing on overseas stocks will increase Forex risks
- 4.5% dividend doesn’t seem too attractive for a REIT investor
- Concentration in one country adds in some risks if Australia economy doesn’t do well
- We have no control over rights issue of any REITs in the component of the ETF