Liberation Aftermath
How will Trump’s tariffs affect Singapore and the rest of the world? Initially, Mr Market said it would be a full-blown trade war, then he changed his mind and is calling bluff on Trump. Only time will tell if this is a short term impact or something that is more long drawn.
Preparations are ongoing to get the SRS Fund ready to seize investment opportunities that come knocking. In fact, some companies directly linked to trade are already on discount, including those in the SRS Fund.
What the SRS Fund Sold
Hence, to beef up some cash, it comes down to which of the SRS Fund holdings I should part with. After much consideration, some OCBC shares and the entire stake of YZJ Financials were sold.
The reason for the sale of YZJ Financials is obvious after attending its AGM. The likelyhood of the company being a multi-bagger after it realises its original value is rather low. The company is flush with cash but lacks real long-term reinvestment prospects. Its marine time fund is opportunistic in nature, hence not sustainable in the longer-term cyclical cycle of the shipping industry.
The sale of OCBC was a calculated reduction of banking exposure for the fund to be deployed into other segments which were hit by the trade tariff.
Touch and Go
After hitting a high and milestone of the $500k mark, the SRS Fund was brought down to earth in April. After being hit by trade war news, share prices of companies such as SATS, Venture, Seatrium and more were all badly hit.
Combined with the sales of the less affected financial companies, the SRS Fund lost all gains for the year and is nearly flat. This underperforms the STI Index, which still manages a 1.18% gain YTD. However, with a cash holding of about 10%, I am still confident the SRS Fund will outperform our benchmark by year-end.
Portfolio Segments
With the rebalancing exercise taking place, the finance segment was reduced by 10% and is now sitting in the cash segment. Over the next few months, I will be looking into companies that are most affected by the trade tariffs to further diversify the SRS Fund.
Dividends
Dividend collection started to trickle in, starting at $2,500 in April. I fully expect the total dividend collected in Q2 to exceed the same period last year. The additional dividend would further increase the SRS Fund’s cash holdings in the months ahead.
SRS Fund Value
The SRS Fund value took a hit in the month of April due to a combination of stock rebalancing as well as a selloff in the manufacturing and service sector following the trade war announcement.
Cash Levels
The cash level is now back up to 11%, at one of the higher levels in recent years. With more dividend inflow, I expect the cash level to stay high in the months ahead, allowing the SRS Fund to have some flexibility if the market continues to see volatility ahead.
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