Wednesday 15 June 2022

Some Personal Updates And My Investment Into The Bear Market- Adverse Impacts of Recession Heading Our Way?

Strange that while inflation this year is expected to be 5%, my boss only gave an increment of less than 1.5% to all staff despite making millions of profits in previous years. So this year is actually a net pay cut given the inflationary pressure on almost everything. For example, the price of food keep going up. My fishball noodle at food centre went up from S$3 to S$3.50 per bowl-my close friends told me S$3.50 is considered cheap these days and they are paying S$5.50 per bowl near their workplaces.  

The "Great Resignation" at my workplace has also begun with my company's Human Resource department unable to retain a single staff who have resigned and HR is unable to find replacement at the old salary rate. My old buddy from University sent me the link that reads "KPMG S'pore increases starting pay by up to 20%" and I was shell-shocked. No wonder my HR Manager is so busy these days fighting battles with the entire labour market for headcounts and talents.

Despite all these challenges of escalating prices, many local residents seem unfazed with the ever increasing interest rates and possible loss of jobs due to the impact of recession. Private properties continue to fly off the shelves upon release by developers as if there is no tomorrow (look at Piccadilly Grand). There is also talks that sub-urban condominiums will need to launch at S$2,000 psf in future to cover for increasing land costs, materials and labour costs. North Gaia EC at Yishun Close already achieves 27% sales at an average of $1,302 psf in April'2022. It was also reported that developers in Singapore sold 1,356 new homes in May'22 relative to April'22 660 units- more than double the previous month. 

The most absurd news is that COEs for category B vehicle is now at S$100K per paper certificate. We need to pay S$150K to S$180K for cars these days? This is absolutely crazy. I told my wife to prepare to take more public transport once our existing COE expires in another 4 years time. It is a good time as the kids would have grown old enough to take the train and bus themselves.
 
1. Investment front
The SGX has been playing see-saw up and down every few days during this period. The S&P500 in US market is also down 20% from the beginning of the year. We are officially in bear territory. 

1.1 Investment into Mapletree Logistics Trust
I have  invested additional S$20K into Mapletree Logistics Trust ("MLT") during this period. The price of MLT has dropped <13.7%> from S$1.90 per unit from beginning of the year to S$1.64 per unit. It has been a long time since I last saw the projected distribution yield hit above 5%. MLT is well-diversified (183 properties in 8 countries worth over S$13 billion as at 31 March 2022) and has just completed 16 M&A this year so far. MLT has an excellent track record of making yield-accretive acquisitions in a space that still sees healthy demand due to the boom in e-commerce. I expect its DPU to continue growing.

1.2 Investment of CPF ordinary funds into S&P500.
I have put in 3 tranches spread over (1 month) into the S&P 500 (total S$15K invested) when it is at level of 3735-3900. If the S&P drop further, I will put in additional CPF funds to take advantage of the opportunity. While I try not to touch my CPF for investments as it represented my last resort retirement funding in event of total loss on the stock market, current opportunity due to the more than 20% plunge in market valuation seems to be worthwhile. However, I have only utilized my CPF ordinary account for investment and will not be using any of my Special Account which has already reached the Full Retirement Sum balances (and earning a risk-free 4% interest rate). 

2. Wife does not believe in investing into the stock market and prefers to hold all cash in bank account 
My wife does not like investing into the stock markets and she prefers to put all her cash in the bank. I managed to convince her to invest an extra S$15K into REITs during this period of market downturn and invested into United Hampshire US REIT and Mapletree Logistics Trust.

I have built up an equity portfolio of S$140K (REITS and local banks) under her own CDP account thus far. Hopefully, I will be able to persuade her to have more faith and to build up a more substantial recurring passive dividend income. Coupled with her overseas investment property being rented out, I reckon her passive income is around S$12K per annum.

Parting thoughts
The persistent high inflation rate is a real nightmare and gives rise to relentless increase in interest rates by the US Federal Reserve to combat it. I am disappointed to see that May'22 is another record month for inflation when I thought that there should be some good news on it being tamed. 

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