Save&Invest

Rise in bonds, equities offsets weaker ETFs, Reits in June

Portfolios remain in positive territory, with two of the three edging up slightly last month

The three simulated investment portfolios tracked under the Save & Invest Portfolio Series remain in positive territory since the beginning of this year despite their relative underperformance last month.

The series features communications manager Shona Chee, 26; entrepreneur Getty Goh, 38, who is married with two children; and retiree Wang Moo Kee, 62. The Portfolio Series, which was introduced by The Sunday Times in January last year, does not involve actual money as it is intended for the purposes of illustration and education only.

To keep them simple, accessible and easy to monitor, all three portfolios are limited to instruments listed on the Singapore Exchange (SGX) and Singapore Savings Bonds, which can be bought via ATM.

There are similarities between the holdings, but the allocations differ depending on individual risk-return objectives and preferences.

Each portfolio has a benchmark that best reflects its mix. For example, Mr Goh's portfolio is heavier on blue-chip shares, while bonds fit Mr Wang's more conservative stance. The simulated portfolios are constructed by CFA Society Singapore (CFAS) for an ideal investment horizon of five to 10 years.


An employee installing interior accessories in a sport utility vehicle on the assembly line at a BMW plant in Greer, South Carolina. The US economy continues to enjoy a strong labour market and low unemployment. PHOTO: BLOOMBERG

PORTFOLIO PERFORMANCE

Ms Chee's portfolio was up 0.13 per cent for the four weeks to June 30, against the 0.38 per cent increase for the benchmark. Mr Goh's investments dipped 0.01 per cent against a 0.4 per cent rise for the benchmark, while Mr Wang's rose 0.15 per cent, trailing the benchmark, which added 0.42 per cent.

The relative underperformance of all three portfolios was due to the global exchange-traded fund (ETF) and real estate investment trust (Reit) selections.

The India (-2.5 per cent) and gold (-2 per cent) ETFs underperformed the MSCI World benchmark (-0.02 per cent), while the 0.5 per cent depreciation of the United States dollar against the Singdollar also hurt performance.

There were no surprises in June and the global markets were generally "well behaved", said the CFAS panel. The Singdollar and the Straits Times Index remained range-bound last month.

A-Reit (-0.5 per cent) and Keppel DC Reit (-0.4 per cent) corrected in June, failing to keep track with the broader S-Reit index which was up 2.06 per cent.

This, however, was partially offset by outperformance of the Singapore stock security selection headlined by Wing Tai (4.5 per cent), Singtel (3.4 per cent), OCBC (3.1 per cent) and Thai Beverage (2.9 per cent).

The bond selection delivered a small positive return, with Ms Chee's and Mr Goh's bonds keeping pace with the ABF Singapore Bond ETF, while the DBS Perp (0.9 per cent) in Mr Wang's portfolio helped deliver a small outperformance over the bond benchmark.

MARKET COMMENTARY

Overall, there were no surprises in June and the global markets were generally "well behaved", said the CFAS panel. The Singdollar and the Straits Times Index remained range-bound last month.

In the light of such a benign environment, the CFAS panel decided to not make any changes to the portfolios.

"Having re-balanced the equity and gold holdings in May, we are holding steady for July," said the CFAS panel.

"There were some concerns about the rapidly escalating geopolitical tensions in the region stemming from the North Korean missile tests but the panel did not think that the long-term fundamentals of regional growth were as yet challenged.

"Our objective remains to keep the portfolios well diversified."

  • Save & Invest Portfolio Series

    The Save & Invest Portfolio Series features the simulated portfolios of a young working adult, a married couple with two young children and a retiree over an 18-month period. It guides retail investors in basic investment techniques and on how to build a portfolio in line with their financial goals and risk tolerance.

    This initiative involves the Singapore Exchange collaborating with CFA Society Singapore (CFAS) and MoneySense, the national financial education programme.

    The CFAS panellists tracking the simulated portfolios are Mr Phoon Chiong Tuck, senior fixed income manager at Lion Global Investor; Mr Jack Wang, partner at Lexico Capital; Mr Praveen Jagwani, chief executive of UTI International, Singapore; and Mr Simon Ng, CEO of CCB International (Singapore).

    Due to requests from readers, you can now access past articles in the series, as well as monthly portfolio reports, by clicking on the Save & Invest Portfolio Series banner at www.sgx.com/academy.

It added that the portfolios performed in line with the benchmarks for June, although the best-performing asset class for the month as well as the quarter that ended June 30 were domestic equities.

"All the portfolios remain fully invested at the moment and are in positive territory since the beginning of this year," said the panel.

It noted that June was relatively lacklustre except the widely anticipated rate hike of 0.25 percentage point by the US Federal Reserve. The US economy continues to enjoy a strong labour market and low unemployment.

Business sentiment in Germany has improved considerably, with unemployment hitting a new low, while the euro zone seems to be in a much stronger position, seen in the hard line being taken by French President Emmanuel Macron and German Chancellor Angela Merkel in the Brexit negotiations.

East Asia had a good month too, with export orders rising in all countries except South Korea. The inclusion of Chinese A-share equities to the benchmark MSCI emerging markets index from next year was generally welcomed by the markets.

While oil had a dramatic month, it did not really overwhelm investor sentiment. Brent plunged below US$50 per barrel and registered the worst first half of a year since 1998. The fact that this occurred despite the output cuts agreed by Opec and Russia points to an ever-increasing stockpile of oil as well as falling break-even rates for US shale oil.

•The next seminar in the Save & Invest Portfolio Series, which will include a portfolio construction exercise, will be held on Sept 2 from 9.30am to 3pm at the NTUC Auditorium. To register, visit www.sgx.com/academy

A version of this article appeared in the print edition of The Sunday Times on July 09, 2017, with the headline 'Rise in bonds, equities offsets weaker ETFs, Reits in June'. Print Edition | Subscribe