$UOB APAC Green REIT ETF(GRN.SI)$
Why Invest?
· Diversified property holdings: The Fund seeks to invest in high-quality and sustainable real estate across a wide range of sectors and markets. As of February 2023, the Fund’s Top Three sectors were retail, office, and diversified Real Estate Investment Trusts (REITs).
· Rising opportunities in Asia: The International Finance Corporation (IFC), a member of the World Bank Group, estimates that by 2030, the green buildings sector within Emerging Markets will see US$24.7 trillion in business investment, driven by the expansion of building construction and the increasing urgency to achieve carbon neutrality1.
· Change in investor requirements: This Fund meets the growing requirement by institutional real estate investors to adopt investment strategies that are more resilient, can minimize systematic risks, and are future-proof.
· High demand for green buildings: According to Jones Lang LaSalle Incorporated (JLL), over 70 percent of corporate occupiers in Asia Pacific are willing to pay a rental premium to lease certified green buildings as part of efforts to meet their decarbonization goals2.
· Capable of delivering positive total returns: The Fund aims to deliver both high dividend yield and capital gains by selecting real estate assets with both good rentals and growth potential.
One Month Portfolio Review
The investment objective of the UOB APAC Green REIT3 ETF4 (the “Fund”) aims to replicate as closely as possible, before expense5, the performance of the iEdge-UOB APAC Yield Focus Green REIT Index (“Index”).
From its inception on 23 November 2021 to 28 February 2023, the Fund tracked the Index very closely with only very minor performance deviation that resulted from fees and initial deployment.
Annualised and Cumulative Returns
The Fund Net Asset Value (NAV) vs Index, 23 November 2021 – 28 February 2023
Source: UOBAM/Bloomberg, 28 February 2023
The Index slightly underperformed its non-green peer S&P APAC REIT Index by 0.14 percent year-to-date.
Source: UOBAM/Bloomberg, 28 February 2023
Past performance is not necessarily indicative of future performance. Performance numbers are not annualized.
Market Review
Global equity markets retreated in February 2023 as concerns mounted around the possibility of higher for longer interest rates to quell persistent inflation. The repricing of the yield curve with a delayed end to the tightening cycle and higher peak rates led to the 10-year US Treasury (UST) yields rising back to 3.95 percent for the first time since November 2022. Market volatility rose as investor sentiment turned risk-averse and pulled the price of risk assets lower. Japan's real estate market led while China/Hong Kong's real estate markets underperformed.
The Japanese government surprised the market by nominating Professor Kazuo Ueda together with two deputy governors Shinichi Uchida (current executive director of Bank of Japan (BOJ)) and Ryozo Himino (ex-head of Japan’s Financial Services Agency (JFSA)) to succeed the current BOJ governor Kuroda. This led to market concerns about potential regime change to the zero interest rate policy (ZIRP) by the BOJ.
The Reserve Bank of Australia (RBA) raised its cash rate target by 25 basis points (bps) to 3.35 percent in February 2023, meeting market expectations. This brings total hikes to 325bps since May 2022. The RBA’s commentary after the meeting shifted to a hawkish surprise as it reiterated its priority to return inflation to the 2-3 percent target.
Singapore announced a budget deficit of S$0.4 billion or 0.1 percent of Gross Domestic Product (GDP) for the financial year (FY) 2023 vs a deficit of S$2 billion or 0.3 percent of GDP for FY2022. Key highlights included higher property taxes with the buyers’ stamp rate raised from 4 percent for property values in excess of S$1 million to 5 percent for property values in excess of S$1.5-S$3 million, and 6 percent for those in excess of S$3 million. Goods and Services Tax (GST) and inflation support measures for households worth S$2.6 billion (0.4 percent of GDP) were also unveiled, and platform companies will be required to pay Central Provident Fund (CPF) contributions for Singaporean workers who are below 30 years old. The government intends to implement a global minimum effective tax rate of 15 percent for large multinational enterprises (MNEs) from 2025 as part of the Base Erosion and Profit Shifting (BEPS) 2.0. The Ministry of Trade & Industry maintained its GDP growth forecast at 0.5-2.5 percent for 2023.
In February 2023, China Securities Regulatory Commission (CSRC) announced a pilot program for real estate private equity investment funds to invest in residential housing, including projects under construction, affordable homes, and rental projects. Investment in commercial real estate and infrastructure projects is also allowed under the program. With the pilot, Chinese regulators aim to boost the property sector and new home sales.
Hong Kong unveiled a budget deficit of HK$54.4 billion or 1.8 percent of GDP for 2023/24 vs a deficit of HK$140 billion (or 4.9 percent of GDP) for 2022/23. Key takeaways included reduced consumption vouchers of HK$5,000 (vs HK$10,000 in the preceding year), lower salary tax reduction ceiling of HK$6,000 (vs HK$10,000 in the preceding year), reinstatement of the ‘Capital Investment Entrant Scheme’ as well as a cut in stamp duty for some first-time home buyers for property purchases of less than HK$9 million. GDP for 2023 is expected to grow 3.5-5.5 percent and headline inflation at 2.9 percent.
Outlook and Positioning
Notwithstanding a backdrop of slowing global growth and monetary policy tightening, Asia looks better placed in the near term given its domestic demand resilience. We believe REITs still present an attractive investment proposition from a total return perspective, with a combination of stable dividend yield supported by cash flow and upside potential for capital values. Our approach is to use both fundamental screening and valuation overlay to identify REITs with relatively more sustainable recovery paths, fewer concerns about financing risks, and better yield-plus-growth trajectories.
The performance of the Fund was elevated by the Japanese market while the Hong Kong market was the main drag in February 2023.
The following chart shows the latest country allocation of the Fund as date of 28 February 2023.
Country Allocation
Source: UOBAM, 28 February 2023
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 effectively on the fourth Monday of the review month. The latest Index review was on 26 September 2022, when the Fund’s rebalancing came into effect on the same day to track closely the Index. The Fund aims to have income distribution on a semi-annual 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 the latest dividend distribution was on 29 December 2022.
1 IFC, “Green Buildings – A Finance and Policy Blueprint for Emerging Markets”, December 2019.
2 JLL Research Commentary, “Premium rental for green buildings in Asia Pacific- Occupiers in Asia Pacific are willing to pay a premium rental for green-certified buildings”, 16 November 2021.
3 Real Estate Investment Trust
4 Exchange Traded Fund
5 The expenses include costs, fees or other charges.
All statistics quoted in the write-up are sourced from Bloomberg as of 28 February 2023 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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