Whether the old adage of sell in May and go away plays out remains to be seen, although some market watchers may take the opportunity to skip town in the first week of May given the long weekend.
Indeed, old quotations have worked out this year when referring to the stock market. Recall the volatility in March - in like a lion, out like a lamb. Or, beware the ides of March, where Romans believed in misfortune falling to people in mid-March. That is when the collapse of Silicon Valley Bank and Credit Suisse occurred.
Early May may turn out to be quiet despite the release of some quarterly results. Increasingly, it appears that the play on the banks as a proxy to interest rate hikes is most likely behind us as their net interest margins reach a plateau, and deposit costs erode their net interest income.
Ideally, with the decline in risk-free rateas, S-REITs should have attracted attention. Unfortunately, though, net property income yields are at around 5% for retail properties, and a tad lower for office properties, compared to cost of debt at 3.5% to 4% historically, and possibly above 4% with future refinancings. It is challenging for unitholders to benefit in this environment when management fees are added on.
See also: Straits Times Index shows signs of decoupling from the US by outperforming
T-bills may continue to provide shelter from the storm with a risk-free rate of 3.7%-3.8%. The strong at heart may dip into a strong S-REIT at yields of 5% to 6%.
United Overseas Bank’s share price has come off somewhat despite a net profit that was around 12% above consensus. Its annualised 2H2022 dividend of 75 cents translates into a yield of 5.3%. Its mid-March low was $27.84 cents, possibly a support level. The forecast is for this year’s net profit to beat FY2022’s; hence investors can expect a higher dividend.
