doctorpot1 shared · Jan 28, 2023 15:50

Bullish on China and SREIT Funds for 2023

TLDR: The average length of a market downturn to reach its bottom is 11 month, and China had crashed for almost 16 months now. The worse might be over for China, and it could be the year of recovery for Chinese stocks.

As interest rate rises, REITs share price had been falling as it has an inverse correlation. Since interest rate is almost at its peak (fed probably will raise it a few more times), it probably is a good time to start looking at REITs in preparation for interest rate reversal starting in probably in 2024.

China Funds

HSI 2 years performance

Looking at the $Hang Seng Index(800000.HK)$ we can see that China had crashed for almost 2 years now thanks to many negative headwinds that is mentioned in this post below:

doctorpot1: Many Chinese stock have gained more than 100%, as negative overhang of China stocks is slowly getting better

Bullish on China and SREIT Funds for 2023

Based on past data, the average length of a bear market to reach its bottom is 11 months, and China had crashed since July 2021 for 16 month now before the crazy recovery in Nov 2022.

Since many of the negative overhang had been cleared such as clear sign of zero-zero covid policy, and clear signs that the tech crackdown is over by allowing $DiDi Global Inc(DIDIY.US)$ (the worse offender) to relist their app back on the app store, and even giving financial license to $Alibaba(BABA.US)$'s ANT Group. The worse might be over for China, and it could be the year of recovery for Chinese stocks.

There are still many potential positive news that may come and help Chinese stock to recover such as clearing of the US accounting audit, China GDP numbers to start recovering, and hopefully more bailout for their distressed property market.

There are still risk in Chinese Market but I'm bullish on them and had been buying into Funds that tracks the Chinese economy such as the $Hang Seng Index(800000.HK)$ and $UOBAM PINGAN CHINEXT US(CXU.SG)$.

For HSI, I had gone in fast and dangerous, by using a Daily Leveraged Certificate (DLC) which is like a "Leverage ETF". I had chosen to enter the 7xLong which is betting that the Index will be going up. 7x is the highest leverage factor available in a DLC, so if HSI goes up by 1% this will go up by 7%. However if HSI drops by 2%, then this will crash by 14%. This is a short term play, so I will probably exit soon.

Another fund that I had position on is the $UOBAM PINGAN CHINEXT S(CXS.SG)$ which tracks the $Chinext Price Index(399006.SZ)$. I had bought this since the IPO, and held it despite all the hate it gotten in the early days as it crash as much as 7.8%. Glad I held on, and will be riding the China wave with it

$Lion-OCBC Sec HSTECH S(HST.SG)$ a fund that tracks $Hang Seng TECH Index(800700.HK)$ is also a good choice, but there will be higher volatility.

Singapore REITs Funds

Looking at the Singapore REIT ETF such as $LION-PHILLIP S-REIT(CLR.SG)$ or $CSOP S-REITs INDEX ETF(SRT.SG)$, we can see that it had been falling as interest rate had been rising. This fall is expected as we know that REITs share price is inversely correlated to interest rate. This is because REIT borrows a lot of money so it affects their dividend payout. On top of that, the have to now compete with a super safe yet higher interest rate TBill.

However, knowing thay interest rate will start falling probably in 2024, we could capitalise on this inverse correlation. As interest rate falls, we should see REITs share price going back up. So if we can estimate when interest rate reversal will start, we could prepare to ride the wave. So S-REIT funds are also in my watchlist

source: S’pore Reits may be ripe for a relook after last year’s beating

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