The Invisible Hand

February is the month the Singapore national budget is tabled, discussed and debated.  It totalled over more than a $100b of spending including in defence, healthcare, education and more.  Using a population of about 5 million, the spending works out to be a cool sum of $20,000 per head for the year.

While most will not see immediate effect of this spending except for the cash and vouchers payout, make no mistake the benefits are immense.  A real estate in Singapore can easily cost 5-10 times that for a similar property across the causeway suggest the value discrepancy.

It’s been raining a lot recently and it is times like this that reaps the rewards of the investment in drainage.  Spendings flows indirectly to benefits not only individuals but also home and other real estates owners situated within the country.  Truly the invisible hand is at work as a dollar less you have to spend on healthcare, housing, education you name it is a dollar gained that can be of use somewhere else.

This is especially true for all homeowners and also commercial and industrial real estate investors.  With continuous annual spending and investment, real estate owners generally have the tailwind behind them.  Further with the backing of our trillion dollar reserves government pulls out all stops to attract businesses from setting up shops locally.  This in turn creates jobs and further demands on real estate.  All this happens without any efforts from the landlords. 

Thus one can conclude both being a homeowner and investing in REITs whose majority portfolio of properties resides in Singapore provide long term benefits supported by the invisible hand.  For those thinking of selling your house in Singapore and moving to Johor, think again and think hard about the value of the invisible hand provides. 

The SRS Fund Review

February gave back all the returns what January had made for the funds. Additional investments were made to Keppel Corp pre split as we take advantage of its price weakness. The fund also added more YZJ Financials given the improving Chinese economy during the month. As such cash level has reach an all time low of 3.3% for the fund.

Further the fund has a new entry by dividend in the form of Sembmarine shares. A total of 76,340 shares were received given the ownership of 4,000 of Keppel Corp shares. It is my intention to hold on to this newly minted O&M company in the medium term and possibly buy more given price weakness. It is my view that the medium term prospect of the industry remain attractive.

Lastly the drag on the fund is mainly caused by recurring theme of higher inflation and higher interest rates. This caused many REITs in the portfolio to fall as investors starts to digest its lower distribution. While interest rates tend to fluctuate I believe REITs will eventually adjust and rewards patience investors in the long term by the mention invisible hand mention in this post.

Dividend started in a trickle of $240 from SGX in Feb but make no mistake that the distribution receive will be much more and will likely be a Q1 record when the quarter ends next month.

The value of the fund took a dive in Feb with weakness in REITs as well as the ex-dividend effects. However short term fluctuation are very common in the stock market and is not a real cause of concern for long term investors