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Ascendas Reit shares rise to new peak: Where next?

Shares of Ascendas Real Estate Investment Trust (Ascendas Reit) (SGX: A17U) are up 2% at the start of the week, after reporting higher first-half distributable income for fiscal 2020. Ascendas Reit shares are trading at S$3.54 each – a new all-time high – as at 11:55 SGT on Monday 27 July 2020. This surpasses the…

Ascendas Reit share price: What’s the latest?

Shares of Ascendas Real Estate Investment Trust (Ascendas Reit) (SGX: A17U) are up 2% at the start of the week, after reporting higher first-half distributable income for fiscal 2020.

Ascendas Reit shares are trading at S$3.54 each – a new all-time high – as at 11:55 SGT on Monday 27 July 2020. This surpasses the stock’s previous peak of S$3.48 achieved in March 2020.

IG’s market analysis show that ‘buy’s form 52% of all trades on the A Reit counter so far this month.

Ascendas Reit’s DPU (dividend) declines 10.8% in H1 2020

Ascendas Reit – Singapore’s largest REIT by market capitalisation at nearly S$13 billion – reported that gross revenue for the six months ended 30 June 2020 (H1 FY2020) rose by 14.6% year-on-year to S$521.2 million.

The group said the increase was mainly contributed by its US portfolio of 28 business park properties and two Singapore business park properties, which were acquired in December 2019.

However, it also noted that the stronger revenue was partially offset by the Covid-19 rent relief support provided to tenants, as well as the divestment of Wisma Gulab in January 2020 and lower occupancies of certain properties

Net property income for the first six months of 2020 rose 11.2% to S$388 million, on the back of lower property tax expenses in H1 2019 due to the retrospective downward revisions in the annual value of certain properties.

Consequently, total income available for distribution for H1 FY2020 rose 3.7% from H1 FY2019 to S$263.2 million.

Despite the higher distributable income, distribution per unit (DPU) – dividends in Reit terms – declined 10.8% year-on-year to S$0.0727, after taking into consideration an enlarged number of applicable units (+16.3%) in issue mainly due to December 2019’s rights issue.

Are you looking to trade Ascendas Reit shares? Start today by opening a live or demo IG account.

Where do analysts see the A Reit share price going next?

Following Ascendas Reit’s latest earnings, top investment analysts have raised their share price targets on the stock.

Jefferies increased their 12-month price targets on Ascendas Reit to S$3.80 a share from S$3.50, DBS from S$3.45 to S$4 a share, while CIMB brokers revised it to S$3.12 a share from S$3 previously.

In its note, DBS gave the stock a ‘buy’ call, citing that the company’s business parks exposure could potentially ‘benefit from the future trend towards decentralised offices as more companies adopt flexible working arrangements’.

The analysts also forecasted that Ascendas Reit could acquire an estimated S$500 million in assets by the end of fiscal 2020, which they say could spur new growth momentum for the company.

‘We believe the next billion in deals will likely come from its Singapore business park properties in the one-north region, which its sponsor may be looking to divest and should be well received by investors,’ they added.

On the other hand, it is worth noting for investors that CIMB analysts downgraded the stock to a ‘hold’ rating from add’, as they see limited near-term upsides following its recent share price. Ascendas Reit’s share price has increased nearly 9% since mid-July 2020.

CIMB also lowered its dividend (DPU) estimates for the company by 2.2% for FY 2020 and 2.6% for FY 2022 in light of changes in its portfolio occupancy, as well as ‘near-term drags’ in the form of S$20 million of tenant rent reliefs.

As at 12:50 SGT on 27 July, IG data show that 68% of clients hold ‘short’ positions on the stock and expect A Reit’s share price to decline.

How to trade Ascendas Reit with IG

Are you feeling bullish or bearish on Ascendas Reit and other Singapore real estate stocks? Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG’s industry-leading trading platform in a few easy steps:

  • Create a live or demo IG Trading Account, or log in to your existing account
  • Enter <Ascendas Real Estate Investment Trust> in the search bar and select the instrument
  • Choose your position size
  • Click on ‘buy’ or ‘sell’ in the deal ticket
  • Confirm the trade
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Daily Financial News

Don’t Count On JPY Correction; Staying Long GBP/JPY

The path of the potential pace of the JPY decline may still be underestimated by markets, which continue trading the JPY long.

While the 10% USDJPY advance from September lows looks impressive from a momentum point of view, it may no thave been driven by Japan’s institutional investors reducing their hedging ratios or Japan’s household sector reestablishing carry trades.

Instead, investors seemed to have been caught on the wrong foot, concerned about a sudden decline of risk appetite or the incoming US administration being focused on trade issues and not on spending. Spending requires funding and indeed the President-elect Trump’s team appears to be focused on funding. Here are a few examples: Reducing corporate taxation may pave the way for US corporates repatriating some of their USD2.6trn accumulated foreign profits. Cutting bank regulation could increase the risk-absorbing capacity within bank balance sheets. Hence, funding conditions – including for the sovereign – might generally ease. De-regulating the oil sector would help the trade balance, slowing the anticipated increase in the US current account deficit. The US current account deficit presently runs at 2.6% of GDP, which is below worrisome levels. Should the incoming government push for early trade restrictions, reaction (including Asian sovereigns reducing their holdings) could increase US funding costs, which runs against the interest of the Trump team.

Instead of counting on risk aversion to stop the JPY depreciation, we expect nominal yield differentials and the Fed moderately hiking rates to unleash capital outflows from Japan.The yield differential argumenthas become more compelling with the BoJ turning into yield curve managers. Via this policy move, rising inflation rates push JPY real rates and yields lower, which will weaken the JPY. Exhibit 12 shows how much Japan’s labor market conditions have tightened. A minor surge in corporate profitability may now be sufficient, pushing Japan wages up and implicity real yields lower.

JPY dynamics are diametrical to last year . Last year, the JGB’s “exhausted”yield curve left the BoJ without a tool to push real yields low enough to adequately address the weakened nominal GDP outlook. JPY remained artificially high at a time when the US opted for sharply lower real yields. USDJPY had to decline, triggering JPY bullish secondround effects via JPY-based financial institutions increasing their FX hedge ratios and Japan’s retail sector cutting its carry trade exposures. Now the opposite seems to be happening. The managed JGB curve suggests rising inflation expectations are driving Japan’s real yield lower. The Fed reluctantly hiking rates may keep risk appetite supported but increase USD hedging costs.Financial institutions reducinghedge ratios and Japan’s household sector piling back into the carry trade could provide secondround JPY weakening effects

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Daily Financial News

Mexico raises interest rates, cites Trump as risk

The head of Mexico’s central bank says U.S. Republican candidate Donald Trump represents a “hurricane” sized threat to Mexico.

Banco de Mexico Gov. Agustin Carstens told the Radio Formula network Friday that a Trump presidency “would be a hurricane and a particularly intense one if he fulfills what he has been saying in his campaign.”

Trump has proposed building a wall along the border and re-negotiating the North American Free Trade Agreement.

Mexico’s central bank raised its prime lending rate by half a percent to 4.75 percent Thursday, citing “nervousness surrounding the possible consequences of the U.S. elections, whose implications for Mexico could be particularly significant.”

Mexico’s peso had lost about 6 percent in value against the dollar since mid-August. It recovered slightly after the rate hike

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Financial News

Africa’s first Fairtrade certified gold co-operative offers hope to gold miners living in poverty

Syanyonja Artisan Miners’ Alliance (SAMA) has become the first artisanal small scale mining co-operative in Africa to become Fairtrade certified, bringing much needed hope to impoverished communities who risk their lives to mine the rich gold seam that runs around Lake Victoria.

SAMA is one of nine previously informal groups from Uganda, Kenya and Tanzania which has benefitted from a pilot project launched by Fairtrade in 2013. This innovative program aims to extend the benefits of Fairtrade gold to artisanal miners across East Africa.

In that short time, SAMA has undergone training in business and entrepreneurship, as well as safe use of mercury, internal control systems, labour rights and better working conditions, health and safety and more. Previously, daily contact with toxic chemicals used to process gold meant members risked disease, premature births and even death.  Fairtrade gold was first launched in 2011, and SAMA now joins Fairtrade certified gold mines MACDESA, AURELSA and SOTRAMI in Peru.

The co-operative produces just 5 kg gold per year, but nevertheless has the potential to significantly benefit many people in the local community through better conditions through certification. It is expected that Fairtrade and organizations like Cred Jewellery will support the miners, ensuring their gold can be refined and made available to jewellers in the UK and other markets.

Gonzaga Mungai, Gold Manager at Fairtrade Africa said: “This is a truly momentous and historical achievement and the realisation of a dream that is many years in the making. Gold production is an important source of income for people in rural economies. Congratulations to SAMA, it sets a precedent which shows that if groups like this can achieve certification, then it can work for others right across the African continent.”

The Fairtrade Gold Standard encourages better practice and changes to come in line with international regulation around the production and trade of so-called ‘conflict minerals’. Under the Standard, miners are required to:

  • Uphold a human rights policy preventing war crimes, bribery, money laundering and child labour
  • Clearly represent where the minerals were mined
  • Minimise the risks of conflict minerals through robust risk assessments and collaboration across supply chains
  • Report to buyers and trading partners regarding the risks of conflict minerals

Now in its second phase, the programme will focus on supporting other mining groups in the region to access affordable loans and explore a phased approach to accessing the Fairtrade market, allowing more mining co-operatives across Africa to participate in the programme.

Gonzaga added: “Sourcing African metals from smallscale miners in the Great Lakes Region is the responsible thing to do. For a long time companies have avoided buying gold from this region, with devastating consequences for impoverished communities who were already struggling. It has driven trade deeper underground, as unscrupulous buyers pay lower prices and launder illegal gold into legitimate supply chains. That’s why we have chosen to work with these groups to help them earn more from their gold within a robust compliance system that offers social, environmental, and economic protections.”

The Fairtrade gold programme offers a small but scalable solution to sustainable sourcing of gold from the region in line with Section 1502 of the Dodd-Frank Act in the US, OECD Due Diligence Guidance and recent EU Supply-Chain Due Diligence proposals which could come into effect in 2016. This means that up to 880,000 EU firms that use tin, tungsten, tantalum and gold in manufacturing consumer products could be obliged to provide information on steps they have taken to identify and address risks in their supply chains for so-called ‘conflict minerals’.

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