$UOB APAC Green REIT ETF(GRN.SI)$
Portfolio Review
The investment objective of the UOB APAC Green REIT[1] ETF[2] (the “Fund”) aims to replicate as closely as possible, before expenses[3], the performance of the iEdge-UOB APAC Yield Focus Green REIT Index (“Index”).
From its inception on 23 November 2021 to31 July2022, the Fund tracked the Index very closely with only very minor performance deviation that resulted from fees and initial deployment.
The Fund Net Asset Value (NAV) vs Index, 23 November 2021 – 31 July 2022
Source: UOBAM/Bloomberg, 31 July 2022
The Index outperformed its non-green peer S&P Asia Pacific REIT Index by 3.09 percent year-to-date (YTD).
iEdge-UOB APAC Yield Focus Green REIT Index vs peer index YTD, 31 December 2021 – 31 July 2022
Source: UOBAM/Bloomberg, 31 July 2022
Past performance is not necessarily indicative of future performance. Performance numbers are not annualized.
Market Review
Global equities rallied in July 2022 (MSCI All Country World Index: 6.5 percent in SGD terms) following the US Federal Reserve’s (Fed’s) dovish interest rate hike outlook. Risk assets soared as the market’s interpretation of a dovish Fed suggest a slowdown in the pace of hikes. The Fed delivered another 75 basis points (bps) hike, bringing cumulative hikes to 1.5 percent year-to-date (YTD). The US dollar eased and 10-year US Treasury (UST) yield fell 36bps to 2.65 percent. Asian equity markets lagged (MSCI All Country Asia Pacific Index: 1.3 percent) the global equities due to weakness in China/Hong Kong markets owing to renewed property woes.
The Bank of Japan (BOJ) maintained its dovish monetary policy stance, widening its policy divergence with most developed economies which has embarked on a tightening mode. The BOJ lifted its core Consumer Price Index (CPI) inflation forecasts for fiscal-year (FY) 2022 to 2.3 percent, 1.4 percent in 2023 and 1.3 percent in 2024. Gross Domestic Product (GDP) growth outlook for FY2022 was downgraded to 2.4 percent (vs 2.9 percent previously), while FY2023 growth was raised marginally to 2 percent (vs 1.9 percent previously). Japan’s current Prime Minister Fumio Kishida and Liberal Democratic Party’s leader won the Upper House election by a landslide, two days after former Prime Minister Shinzo Abe was assassinated.
Singapore’s second quarter of 2022 advance GDP estimates rose by 4.8 percent year-on-year (y/y) (first quarter of 2022: 4 percent y/y), missing market expectation of 5.4 percent. Growth was aided by a low-base effect due to the tightened COVID-19 restrictions in the second quarter of 2021. Core CPI in June 2022 rose faster than expected at 0.7 percent month-on-month (m/m), and 4.4 percent y/y. Headline inflation was up 1 percent m/m and 6.7 percent y/y. Inflationary pressure was broad based acrossa broad set of categories including services, food, retail and utilities.The Monetary Authority of Singapore (MAS) expects core inflation to peak at 4 to 4.5 percent, and raised its projection for 2022 to 3 to 4 percent (vs 2.5 to 3.5 percent previously). The MAS seeing inflation as a bigger risk than the economic slowdown, tightened monetary policy by raising the mid-point of the Singapore dollar nominal effective exchange rate (S$NEER) band upwards, in an off-cycle move on 14 July 2022.
Australia’s second quarter of 2022 headline inflation rose 1.8 percent quarter-on-quarter (q/q) and 6.1 percent y/y. This marks the second highest reading since the introduction of the Goods and Services Tax (GST). The labour market continues to tighten with unemployment rate falling to 3.5 percent in June 2022. The Reserve Bank of Australia (RBA) hiked cash rate by 50bps to 1.35 percent on 6 July 2022, in line with market expectation.
The Hong Kong Monetary Authority raised its benchmark rate by 75bps to 2.75 percent as it seeks to tamper inflation. The advanced GDP for the second quarter of 2022 fell 1.4 percent y/y, weaker than the market expectation of -0.2 percent y/y. The government is considering easing travel restrictions from the current 7 days of quarantine for arrivals to a shorter quarantine duration and introducing a two-color health code system.
Outlook and Positioning
Despite of the negative factors such as the rising interest rate and rising bond yields against a backdrop of heightened geopolitical risks and concerns over stagflation, the REITs market recovered in July 2022. Property-level fundamentals remain supportive in spite of the macro-level headwinds. Sector valuations post the rebasing remain relatively attractive and conditions supporting a strong REITs sector earnings growth outlook are largely intact.
The performance of the Fund was elevated by Australia market while Hong Kong market was the main drag in July 2022. The following chart shows the latest country allocation of the Fund as date of 31 July.
Country Allocation
Source: UOBAM, 31 July 2022
The Fund aims to replicate as closely as possible, before expenses, the performance of the Index. The Index is reviewed semi-annually in March and September. Results from an Index review are implemented effective on the fourth Monday of the review month. The latest Index review was on 28 March 2022, when the Fund’s rebalancing coming into effective on the same day to track closely the Index. The Fund aims to have income distribution on a quarterly basis. Distributions in SGD are not guaranteed. Distributions may be made out of income, capital gains and/or capital. This relates to the disclosed distribution policy as set out in the Fund’s prospectus. Please refer to www.uobam.com.sg for more information. The ex-date of latest dividend distribution was on 29 June 2022.
ESG (Environmental, Social, and Governance) Impact
Green Impact Dashboard
The Green Impact Dashboard (GID) measures the extent that green tilting[4] provides the Fund with a positive sustainability impact. It compares the performance of the Fund against the Non-Green Tilt APAC REIT index. The two indices have the same holdings, but the latter does not include a green tilt. We measure the Fund’s green impact from 4 metrics: greenhouse gas emission, energy consumption, water consumption and Green building certification.
This dashboard indicates that green tilting provides the Fund with a positive green impact and our investors can easily monitor the concrete impact.
Source: UOBAM, GRESB, July 2022
*DCR: Valid green building certification obtained at the time of design, construction, and/or renovation
**OPS: Valid operational green building certification
[1] Real Estate Investment Trust
[2] Exchange Traded Fund
[3] The expenses include costs, fees or other charges.
[4] Green tilting refers to the weights of selected REITs within the ETF/Index. The weights of selected REITs can either increase, reduce or remain unchanged at each index review date based on the GRESB Environmental Performance and Development Components (“Environmental Score”) in addition to the overall GRESB Score as assessed by the independent research firm, GRESB, to reward greener REITs and penalize less greener REITs.
All statistics quoted in the write-up are sourced from Bloomberg as at 31 July 2022 unless otherwise stated.
Important Notice and Disclaimers
This document is for general information only. It does not constitute an offer or solicitation to deal in units (“Units”) in the UOB APAC Green REIT ETF (the ”Fund”) or investment advice or recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it.
The information contained in this document, including any data, projections and underlying assumptions, are based upon certain assumptions, management forecasts and analysis of information available and reflects prevailing conditions and the views of UOB Asset Management Ltd (“UOBAM”) as of the date of this document, all of which are subject to change at any time without notice. In preparing this document, UOBAM has relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was otherwise reviewed by UOBAM. While the information provided herein is believed to be reliable, UOBAM makes no representation or warranty whether express or implied, and accepts no responsibility or liability for its completeness or accuracy. Nothing in this document shall, under any circumstances constitute a continuing representation or give rise to any implication that there has not been or there will not be any change affecting the Fund. No representation or promise as to the performance of the Fund or the return on your investment is made. Past performance of the Fund or UOBAM and any past performance or prediction, projection or forecast of the economic trends or securities market are not necessarily indicative of the future or likely performance of the Fund or UOBAM. The value of Units and the income from them, if any, may fall as well as rise, and is likely to have high volatility due to the investment policies and/or portfolio management techniques employed by the Fund. Investments in Units involve risks, including the possible loss of the principal amount invested, and are not obligations of, deposits in, or guaranteed or insured by United Overseas Bank Limited (“UOB”), UOBAM, or any of their subsidiary, associate or affiliate (“UOB Group”) or distributors of the Fund. The Fund may use or invest in financial derivative instruments and you should be aware of the risks associated with investments in financial derivative instruments which are described in the Fund's prospectus. The UOB Group may have interests in the Units and may also perform or seek to perform brokering and other investment or securities-related services for the Fund.
Investors should note that the Fund is not like a conventional unit trust in that an investor cannot redeem his Units directly with UOBAM and can only do so through the participating dealers, either directly or through a stockbroker if his redemption amount satisfies a prescribed minimum that will be comparatively larger than that required for redemptions of units in a conventional unit trust. The list of participating dealers can be found at www.uobam.com.sg. An investor may therefore only be able to realise the value of his Units by selling the Units on the Singapore Exchange Limited (“SGX”). Investors should also note that any listing and quotation of Units on the SGX does not guarantee a liquid market for the Units.
An investment in unit trusts is subject to investment risks and foreign exchange risks, including the possible loss of the principal amount invested. Investors should read the Fund’s prospectus, which is available and may be obtained from UOBAM or any of its appointed agents or distributors, before deciding whether to subscribe for or purchase any Units. You may wish to seek advice from a financial adviser before making a commitment to invest in any Units, and in the event that you choose not to do so, you should consider carefully whether the Fund is suitable for you.
The Fund is not in any way sponsored, endorsed, sold or promoted by and/or its affiliates and SGX and/or its affiliates make no warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the iEdge-UOB APAC Yield Focus Green REIT Index (the “Index”) and/or the figure at which the Index stands at any particular time on any particular day or otherwise, The Index is administered, calculated and published by SGX. SGX shall not be liable (whether in negligence or otherwise) to any person for any error in the Fund and the Index and shall not be under any obligation to advise any person of any error therein.
“SGX” is a trade mark of SGX and is used by the Index under license. All intellectual property rights in the Index vest in SGX.
The use of UOB's name, logo or trademark on this document in relation to the Fund is not representative of the views of UOB. UOB is not the offeror or manager of the Fund and does not perform any investment nor advisory role to UOBAM as a consequence of the use of the word “UOB” in the Fund’s name. UOB is not responsible for the performance of the Fund nor is UOB involved in the manner with which UOBAM manages the Fund. No recommendation or advice is given by UOB of any kind and this document was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. UOB assumes no direct or consequential liability for any errors in or reliance upon this document.
This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.
UOB Asset Management Ltd Co. Reg. No. 198600120Z
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