Dacai

$Suntec Reit(T82U.SG)

The Context: The prices of reits have come under pressure the past few days due to increased probability of a rate hike. Some of my friends saw it as an opportunity to buy at a more attractive price and dividend yield while others are adopting a wait-and-see approach. However, I just read news that Governor Waller’s speech caused the 10-year Treasury bond yield to plunge as the market interpreted it as support for maintaining the interest rate so the reit prices may recover tomorrow.

My Trade: Nothing.

Takeaway: News can have pronounced short-term impact on stock prices but expectations can change quickly. If your convictions and the long term fundamentals haven’t changed drastically, there is no need to panic.

Investor traits quiz

$Suntec Reit(T82U.SG)

The Context: The price today has dropped to 1.49 which is a somewhat bearish sign as it is more than 50% pullback from the recent high of 1.58. The just released personal consumption expenditure price index for July is 3.7%, higher than 3.6% in June when the target is 2% so the probability of a rate hike in September has increased from 36% to 44%. This may put some pressure on reit prices in the near term but I think the rate may be kept the same since the US is also trying to balance the cost of servicing its 40-trillion-dollar debt.

My Trade: Continue to hold.

Takeaway: Expectations of interest rate changes can affect the stock price in the short term but if the fundamentals have not changed drastically, there is no need to sell.

$Suntec Reit(T82U.SG)

Context: After reaching 1.58, Suntec Reit has retreated to 1.51-1.52 which is a healthy pullback in my humble opinion. Treasury yields have been falling due to bond buy backs by the US Treasury. If interests rates are eased instead of being hiked, this will be a positive catalyst for reits.

My Trade: Continue to hold and let the dividends reduce my position cost.

Takeaway: Doing nothing is a strategy too.

$Suntec Reit(T82U.SG)

Context: Way to go, Suntec Reit does not disappoint as it makes another new high today! You can see from the charts the price of Suntec Reit has been quite stable and one of the better performers out of the other S-reits. I believe this is because its DPU has proven to be resilient. If I sell now, it is like free money as after ex-dividend, it has continued to go up.

My Trade: Nothing although it is very tempting to take partial profits.

Takeaway: Don’t sell the winners.