In the first quarter of 2019, local benchmark Straits Times Index ended flat as investors juggled between worries about higher US recession risks and the impending outcome of the US-China trade talks. The only bright spot was the S-REIT sector as it outperformed on the Fed’s dovish interest rate hike forecast. The slowdown in hike came from lower GDP growth expectations and rising unemployment, leading to the inversion of US yield curve to heighten recession fears.
According to DBS, here are three investment strategies for you to jumpstart your portfolio.
Investors Takeaway: 3 Investment Strategies To Jumpstart Your Portfolio By DBS
Strategy 1: ‘Peak’ Interest Rate, Uncertain Growth Environment Calls For Greater Focus On Yield/Defensive Stocks
According to the Fed’s dot plot, they are forecasting zero hikes this year and just one hike from now till end-2021. The Fed cited growth uncertainty, tame inflation and uptick in unemployment rate as the reasons for the zero hike forecast. In light of the Fed’s further dovish swing, yield and defensive stocks are likely beneficiaries as investors seek safety.
In the yield and defensive stocks universe, DBS’ large cap REIT/Trust picks are Frasers Centrepoint Trust, Mapletree Commercial Trust, Mapletree Logistics Trust, Mapletree North Asia Commercial Trust and Mapletree Industrial Trust. DBS also recommends Ascendas India Trust, Keppel-KBS US REIT and OUE Commercial REIT and Netlink NBN Trust as its small/mid cap REIT/Trust picks. For defensive stocks with good yield, DBS recommends ST Engineering and SATS.
Strategy 2: Focus On Large-Cap Stocks With Attractive Upcoming Dividend Payouts
Another strategy that DBS recommends is to focus on large cap stocks with attractive upcoming dividend payouts. This comes ahead of the April/May ex-dividend period where DBS favours stocks with good dividend payout. According to DBS, Venture Corp, UOB and ST Engineering are expected to deliver a dividend/price ratio of more than 2.5 percent in the upcoming dividend window.
Strategy 3: Property Plays To Ride On URA’s Draft Masterplan 2019
URA recently unveiled the draft Masterplan 2019 detailing key property developments in the upcoming decade. Some of the key developments in the Masterplan include higher plot ratios in the Central Business District (CBD) and the Orchard region. URA is also planning to rejuvenate the CBD area by allowing more live-in population in the commercial district.
DBS views the increase in plot ratio as a positive development for S-REITs with exposure to the CBD such as CapitaCommercial Trust, Keppel REIT, Suntec REIT, Frasers Centrepoint Trust, and OUE Commercial REIT. CapitaLand, CDL, Frasers Property and UOL are also beneficiaries of URA’s draft Masterplan 2019.
Besides that, URA also revealed that the Greater Southern Waterfront development will start and span over the next 5-10 years. DBS expects Mapletree Commercial Trust to benefit from this development as residential developments increase in this area over the long term.