Panellists' rationale for global ETFs and Reits selection


The largest physically backed gold exchange-traded fund (ETF) in the world, SPDR Gold Shares, offers investors a relatively cost-efficient way to access the bullion market. With less supply being added every year in coming years, and perhaps permanently, the scarcity value of gold is set to increase.

The global stock market has stagnated while the overall economy is relatively weak. Amid a flat currency environment, gold is deemed to preserve wealth. It also serves as an inflationary hedge.

On the demand side, China continued to add to its gold reserves. It bought 103.9 tonnes in the second half of last year. Global market anxiety and nervousness are also boosting gold's safe haven appeal.


This ETF tracks the Thomson Reuters/Jefferies CRB Non-Energy Index. It is a commodity futures index that includes aluminium, cocoa, coffee, copper, corn, cotton, gold, lean hogs, live cattle, nickel, orange juice, silver, soya bean, sugar and wheat. It is designed to provide dynamic representation of broad trends in non-energy commodity prices.

Agricultural commodities are sensitive to weather events like El Nino and La Nina in the short term, but from a longer-term perspective, demographic trends are of paramount importance. In 1959, there were fewer than three billion inhabitants on earth. Today there are over 7.4 billion, which means there are more than double the number of mouths to feed. The chance of adverse weather conditions this year potentially resulting in poor harvests and a reduced supply of crops motivates us to look at agricultural commodities and add this ETF as a form of diversification and opportunity.


This tracks the performance of the FTSE China 50 Index. China remains an important market. It accounts for 15 per cent of global GDP but 40 per cent of global GDP growth and 20 per cent of global capital expenditure on physical assets such as equipment, property and industrial buildings.

China has been making the painful transformation from an industrial economy to a service economy. China has also moved from export-led growth to domestic demand-driven growth.

The economic transition should bode well for long-term growth sustainability. China still has a lot of room to expand its service industries, reform its state-owned enterprises and reduce the income disparity between cities and rural areas.

Its economy should post healthy growth of 6.7 per cent this year, despite jitters over the yuan's depreciation. Though the number is down from 6.9 per cent last year, it is still high compared with other countries. While we should be cautious and monitor the developments in China closely, there are opportunities to capitalise on its long-term growth.


The ETF tracks the performance of the MSCI USA Total Return Net Index, which holds about 600 constituents. The US Federal Reserve expects the economy to grow 2.4 per cent this year while US consumers are expected to contribute 70 per cent of GDP, continuing to be the bright spot of the economy.

Reasonable credit availability for borrowers and faster wage gains are drivers of US growth. After all, wages are critical for household purchasing power. Unemployment has dropped to 5 per cent and is expected to fall to averages of 4.8 per cent this year and 4.2 per cent next year.

Nationally, in December alone, employers increased payroll by 292,000, well above what Wall Street had expected. The economy is not as bad as market sentiment is suggesting.


This tracks the performance of the Euro Stoxx 50 Index, which includes the shares of 50 sector-leading euro zone firms.

Europe has been troubled by headwinds both internal - such as sovereign indebtedness, "Grexit" and political discord - and those outside of its control such as the refugee crisis, Ukraine and the slowdown in China and emerging markets.

On the bright side, Europe is set to have accelerated growth as policies remain supportive and corporate and economic fundamentals appear to be improving. Credit data, manufacturing activity and business confidence have all shown signs of improvement. Corporate earnings in the euro area delivered 3 per cent growth last year, and we expect favourable earnings this year.

European equities will be supported by a more proactive European Central Bank, continued high levels of mergers and acquisitions and continued banking system repair. The disconnect between depressed sentiment and resilient fundamentals offers attractive buying opportunities.


A-Reit owns a total of 102 properties in Singapore, 27 in Australia and two business parks in China.

It is trading at 12.5 times its earnings with an expected yield of 6.75 per cent. A-Reit's weighted average lease term to expiry is expected to increase from 3.83 years to 3.85 years.


CMT owns 16 shopping malls here, including Tampines Mall, Junction 8, Funan DigitaLife, IMM Building, Plaza Singapura, Bugis Junction, JCube, Clarke Quay and Bugis+. It is trading at 12 times its earnings with an indicative yield of 6.2 per cent. Price-to-book is at a reasonable multiple of 1.03 times. We believe the management's strong track record and its focus on necessity spending will allow it to better weather the challenges.

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A version of this article appeared in the print edition of The Sunday Times on January 24, 2016, with the headline Panellists' rationale for global ETFs and Reits selection. Subscribe