Friday, November 19, 2021

Rising Inflation? Rising Interest Rates? Both Are Not So Good

Recent economic talk has been centred on two words that has the same first two letters: inflation and interest. These two phrases have a not-so-favourable connotation to a third word with the same said first two letters that you and me are familiar with: investing. 

What About Inflation And Interest?


Inflation, as we know it, is the increase in prices and decline of the value of money. Grown at a steady pace, inflation is healthy as it is associated with economic growth. Too much inflation over a given time, however, leads to hyperinflation and this causes prices to rise unchecked and hastened the decline of monetary value.


Interest rates are one of the main tools used by governments and central banks to control the rate of inflation. A rise in interest rates will incentivize people to keep more cash as opposed to spending it since there is an associated yield. Also, it would raise the cost of borrowing and thus, provide a check on growth which is a basis for inflation.


Both are part and parcel of the whole scheme of things, and both can generally move and/or affect the economy and market. Notwithstanding other factors and issues, balancing between inflation and interest rates is a delicate act.


What Is Happening Now?


The current narrative of the situation is that inflation was the result of supply chain issues caused by the COVID-19 pandemic. Pent-up demand and a dearth of supply of goods and services brought about the rise of prices across, and these caused a chain effect across the entire economy. 


The Federal Reserve, the central bank of the United States, had announced plans of tapering, i.e., reduction of monetary stimulus of the economy, one of the factors in contributing to inflation. With tapering, interest rate hikes are expected soon by market participants, and when the Federal Reserve starts to increase interest rates, a large portion of the world’s economy would be affected, one way or another.


Effects On Investment


The problem about these two is that too much of one thing is generally not so good for investors. Too much inflation, and you will get loss of value of your cash, and bond payouts may also devalue since they pay a fixed amount. 


Too high an interest rate, your equities and REITs are affected since it raises the cost of borrowing and dampens leveraged growth; bonds are affected as their annual coupon rate may go lower than the interest rate itself and thus become unpopular; commodities are affected as holding them do not provide yield.


So how do we protect our investments? Simple. The above paragraphs talked about which asset classes are negatively affected by high (not hyper) inflation and rising interest rates. If we put a contextual mirror to them, you can flip them to see the positive side of things.


Still don’t get it? Here it goes. Inflation is good for equities, REITs and commodities, while a high interest rate allows cash to provide yield, generally speaking. In essence, the underlying message that I want to convey is: stay diversified. Diversification is key in protecting your investment portfolio in all kinds of economic weather.


One More Thing About Bonds


If you had noticed, bonds were unfavourable in times of high inflation and high interest rates, so I guess the next question would be: do we still need bonds in our investment portfolio?


My answer (and I am breaking my usual “it depends” rule) is yes. The inflation-interest rate scale is but one of the spectrums that is commonly used and observed in economic situations and market conditions. Bonds are useful in the recession part of the expansionary-recessionary scale in which it is a typical go-to asset class, and it is favoured during deflation in the inflation-deflation scale. Putting it simply, the whole thing is like a multi-faceted radar chart with different axes representing the range of factors.


Stay safe, stay calm, stay invested.

Monday, November 8, 2021


We have two new REIT ETFs coming up: CSOP iEdge S-REIT Leaders Index ETF (CSOP ETF) and the UOB APAC Green REIT ETF (UOB Green ETF), both to be listed on the Singapore Exchange (SGX) on 18 Nov 2021 and 23 Nov 2021, respectively. With their entry, the total number of REIT ETFs listed on SGX will be five. 

The links to the upcoming REIT ETFs are under References below. In this post, I would like to make a selected comparison between them, and my take of the two REIT ETFs in general.







iEdge S-REITs Leaders Index

iEdge-UOB APAC Yield Focus Green REIT Index


Total Expense Ratio 

(per annum)


0.615% (estimated)1

0.85% (estimated)2

No. of Constituents

(based on index)




Geographical Breakdown

Singapore – 64%

Australia – 9%

United States – 5%

Mainland China & Hong Kong SAR – 8%

Japan – 3%

Others – 9%3


Japan – 40%

Australia – 36%

Singapore – 16%

Hong Kong – 8%4

Sectoral Breakdown

Industrial – 42.5%

Office – 19.7%

Retail – 18.4%

Data Centre – 7.5%

Multi-Asset Class – 6.9%

Healthcare – 2%

Residential – 1.9%

Hotel – 1.2%3


Diversified – 30%

Retail – 29%

Office – 28%

Industrial – 9%

Residential – 2%

Real Estate Operating Companies – 1%

Specialised – 1%4

Dividend Yield 

(latest 12 months)


3.96% (as at 30 Jun 2021)5

4.25% (as at 30 Sep 2021)4


Fig.1: Comparison of selected factors between the two upcoming REIT ETFs.


A Note Before We Proceed


Before I begin to pen down a conclusion, I would like to bring in the existing three REIT ETFs, using the same factors in Figure 1.



Phillip SGX APAC Dividend Leaders REIT ETF6

NikkoAM-Straits Trading Asia Ex-Japan REIT ETF7


Lion-Phillip S-REIT ETF8


iEdge APAC Ex-Japan Dividend Leaders REIT Index

FTSE EPRA Nareit Asia ex Japan REITs 10% Capped Index


Morningstar® Singapore REIT Yield Focus Index 

Total Expense Ratio 

(per annum)





No. of Constituents



28 (as at 31 Mar 2021)


Geographical Breakdown

Australia – 52.09%

Singapore – 34.39%

Hong Kong SAR – 10.84%


Singapore – 75.4%

Hong Kong SAR – 15.3%

Malaysia – 3.5%

India – 3.5%

China – 1.2%

Thailand – 1%

(as at 31 Mar 2021)


Singapore – 100%9

Sectoral Breakdown

Diversified – 41.67%

Retail – 27.7%

Industrial – 13.16%

Office – 12.38%

Others – 2.41%


Retail – 36.3%

Industrial – 30.5%

Office – 12.7%

Diversified – 11.4%

Hotel & Resort – 3.3%

Specialised – 3.2%

Others – 2.2%

(as at 30 Sep 2021)


Industrial – 35.7%

Retail – 32.8%

Specialised – 9.6%

Diversified – 6.1%

Healthcare – 5.8%

Office – 5.6%

Hotel & Resort – 1.2%

Residential – 0.7%


Dividend Yield 






Fig.2: Comparison of selected factors between the three listed REIT ETFs.


The reason why I brought all the REIT ETFs in is because we need to have an overall view of the REIT ETF landscape in SGX before making the call. As displayed in Figures 1 and 2, there are similarities and differences between the five, along with it some pros and cons are expected.


The factors shown here are typically used (but not exhaustive) by investors (myself included) in the selection of ETFs to invest in for a certain asset class (in this case, REITs). As to which factor to place emphasis on would depend on the individual; some may go for geographical and sectoral diversification, while some may just look at total expense ratios, and others would place importance on the dividend yield as a barometer for future payouts, etc. You could also have a weighted score across the factors and from there determine which to go for.


The Bedokian’s Take


Coming back to the two ETFs, the decision is dependent on the individual investor himself/herself. If one is convinced on the green theme, then having the UOB Green ETF is key, ceteris paribus. Another plus point for the UOB Green ETF is the high percentage of Japanese properties, which for the other one (and the existing three) are relatively much lower, thus a somewhat good proxy in Japanese market exposure.


In terms of geographical diversification and a higher proportion in industrials, the CSOP ETF would be the choice, also considering the seemingly lower expense ratio. Therefore, as per the typical reply in a Bedokian Portfolio blogpost, the answer is “it depends”, but this time it would be on yourself, the individual investor.


If your portfolio is large enough and want to have a diversification of ETFs, then there is no harm in getting both (or all five), too.




CSOP iEdge S-REIT Leaders Index ETF (




1 – CSOP SG ETF Series I, CSOP iEdge S-REITs Leaders Index ETF prospectus p69-70, 28 Oct 2021. (accessed 6 Nov 2021). Percentage is derived based on stated current and/or known % p.a. and includes management, trustee and other fees and charges.


2 – United ESG Advanced ETF Series, UOB APAC Green REIT ETF prospectus p12-13, Oct 2021. (accessed 6 Nov 2021). Percentage is derived based on stated current and/or known % p.a. and includes management, trustee, valuation and accounting, registrar, audit and custodian and other fees and charges.


3 – Presentation of CSOP iEdge S-REITs Leaders Index ETF: Riding the Wave with S-REITs Leaders by FSMOne. 12min 16 sec mark. (accessed 6 Nov 2021).


4 – iEdge-UOB APAC Yield Focus Green REIT Index. 30 Sep 2021. (accessed 6 Nov 2021).


5 – iEdge S-REITs Indices. 30 Jun 2021. (accessed 6 Nov 2021).


6 – Phillip Capital Management. Phillip SGX APAC Dividend Leaders REIT ETF Product Info Sheet. 30 Sep 2021. (accessed 6 Nov 2021).


7 – NikkoAM-StraitsTrading Asia ex Japan REIT ETF. (accessed 6 Nov 2021). All data in the respective column are from the site itself and downloadable content from the site, unless otherwise specified.


8 – Lion-Phillip S-REIT ETF. (accessed 6 Nov 2021). All data in the respective column are from the site itself and downloadable content from the site, unless otherwise specified.

9 – Geographical breakdown is based on the country of listing of the ETF constituents, not that of the constituents’ assets.


10 – Data from 7 Nov 2021.