UOB APAC Green REIT ETF Fund Commentary

Here's its monthly commentary for the month of May 2022.

UOB Asset Management
UOB Asset Management02 Aug 2022 1386 Views
UOB APAC Green REIT ETF Fund Commentary

Portfolio Review

The investment objective of the UOB APAC Green REIT ETF (the “Fund”) aims to replicate as closely as possible, before expenses, the performance of the iEdge-UOB APAC Yield Focus Green REIT Index (“Index”).

From its inception on 23 November 2021 to 31 May 2022, the Fund tracked the Index very closely with only very minor performance deviation that resulted from fees and initial deployment.



The Index outperformed its non-green REIT indices by 3.18 percent comparing to S&P Asia Pacific REIT Index and by 3.18 percent comparing to iEdge APAC REIT Index year-to-date (YTD).

iEdge-UOB APAC Yield Focus Green REIT Index vs peer indices YTD, 31 December 2021 – 31 May 2022.



Market Review

Global equities ended the month marginally lower (MSCI All Country World Index: -0.7 percent in SGD terms) as investor concern spread from inflation to recession. US Federal Reserve delivered the first 50 basis points (bps) hike in 22 years and announced plans for balance sheet tightening to tackle runaway inflation. Energy extended its rally amid European Union (EU) attempts to ban Russian oil imports, while industrial metals retreated on COVID-19 lockdowns in China. Asia markets outperformed global equities (MSCI All Country Asia Pacific Index: -0.3 percent in SGD terms) thanks to strength in North Asia markets. People Bank of China (PBoC) cut the 5-year loan prime rate (LPR) by 15bps while the State Council of the People's Republic of China announced its pledge for more policy support to rejuvenate growth, along with the gradual relaxation of restrictions in Shanghai. The S&P APAC REIT Index (-2.87 percent) underperformed the broader equities market led by Australian REITs. Japan REITs (JREITs) rebounded after retreating in April 2022.

Japan’s core consumer price index (CPI) for April 2022 rose 2.1 percent year-on-year (y/y), higher than market expectation and is the fastest pace of increase since consumption tax rate was raised to 8 percent from 5 percent back in March 2015. The surge in core inflation was largely driven by higher energy costs, alongside higher costs for imported goods owing to the weakening Japanese yen.

Singapore revised its first quarter 2022 gross domestic product (GDP) growth higher to 3.7 percent y/y (vs preliminary estimate of 3.4 percent y/y). Full year GDP growth forecast of 3-5 percent was maintained although authorities flagged the growth is likely to come in at the lower half of the forecast range due to a weakened outlook from rising external risks.

Australian’s first quarter of 2022 GDP slowed (compared to the fourth quarter of 2021) but still solid at 3.3 percent y/y (quarter-on-quarter (q/q) :0.8 percent), better than market expected. This is despite interruptions from a surge in COVID-19 cases and adverse weather. Household consumption grew strongly at 1.5 percent q/q driven by wages growth while public spending rose 1.7 percent q/q on the back of defense spending.

Hong Kong maintained its first quarter of 2022 GDP forecast of a 4 percent y/y contraction but revised down its Fiscal Year (FY) 2022 GDP forecast to 1-2 percent y/y, compared to a previous estimate of 2-3.5 percent y/y. Authorities cited the weaker than expected first quarter GDP growth alongside a deteriorating outlook for exports.

Outlook and Positioning
Despite the macro-level headwinds, property-level fundamentals remain supportive benefitting from regional reopening with a relaxing restriction on tourism. We believe REITs still present an attractive investment proposition from a total return perspective, with a combination of stable dividend yield supported by cash flow and upside potential for capital values. Sector valuations post the rebasing remain relatively attractive and conditions supporting a strong REITs sector earnings growth outlook are largely intact.

The performance of the Fund was elevated by Hong Kong market while Singapore market was the main drag in May 2022. The following chart shows the latest country allocation of the Fund as date of 31 May.


The Fund aims to replicate as closely as possible, before expenses, the performance of the Index. The Index is reviewed semi-annually in March and September. Results from an Index review are implemented effective on the fourth Monday of the review month. The latest Index review was on 28 March 2022, with the Fund’s rebalancing coming into effective on the same day to track closely the Index. The Fund aims to have income distribution on a quarterly basis. Distributions in SGD are not guaranteed. Distributions may be made out of income, capital gains and/or capital.


ESG (Environmental, Social, and Governance) Impact

Green Impact Dashboard
The Green Impact Dashboard (GID) measures the extent that green tilting4 provides the Fund with a positive sustainability impact. It compares the performance of the Fund against the Non-Green Tilt APAC REIT index. The two indices have the same holdings,but the latter does not include a green tilt. We measure the Fund’s green impact from 4 metrics: greenhouse gas emission, energy consumption, water consumption and Green building certification.

This dashboard indicates that green tilting provides the Fund with a positive green impact and our investors can easily monitor the concrete impact.




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