So, you’re keen to invest in Real Estate Investment Trusts (REITs) but you want a diversified portfolio instead of picking individual REIT stocks? You’re in the right place.
There are a few REIT ETF in Asia, and NikkoAM-StraitsTrading Asia ex Japan REIT ETF (also known as NikkoAM-STC Asia REIT ETF) is one of them.
From the name itself, it’s hard to tell what’s covered in NikkoAM-StraitsTrading Asia ex Japan REIT ETF. In a layman’s term, this ETF covers the top REITS in Asia, but minus Japan. It pays out quarterly dividend and can be bought via lump sum or monthly Dollar-Cost-Averaging (DCA).
Now, let’s dig into the details.
What is NikkoAM-StraitsTrading Asia ex Japan REIT ETF?
NikkoAM-StraitsTrading Asia ex Japan REIT ETF (SGX: CFA) is an Fund that tries to replicate the performance of the FTSE EPRA Nareit Asia ex Japan REIT Index, which is an index compiled by FTSE International Limited, that aims to represent general trend of REITS across developed and emerging economies in Asia excluding Australia, New Zealand and Japan.
This is a 10% Capped Index, which means the largest weighting any REIT can have is 10%.
At the time of writing, NikkoAM-StraitsTrading Asia ex Japan REIT ETF holds more than 20 REITS that are listed in stock exchanges across Asia countries. Majority of the REITS are concentrated in Singapore. The rest are in China, Hong Kong, India, Malaysia, Thailand and Indonesia.
Key Information
Below are some key information about NikkoAM-StraitsTrading Asia ex Japan REIT ETF.
- Inception: 29 March 2017
- Benchmark: FTSE EPRA Nareit Asia ex Japan REIT Index
- Manager: Nikko Asset Management Asia Limited
- Base Currency: Singapore Dollars SGD (CFA) and United States Dollar USD (COI)
- Listing: Singapore Exchange (Mainboard)
- Trading Board Lot Size: 10 units
Components
The Index constituents are reviewed on a quarterly basis in March, June, September and December.
To check the latest components and weighting of this ETF, go to NikkoAM-StraitsTrading Asia ex Japan REIT ETF homepage, click “Document” tab at the header, then click “Indicative Holding.”
As of December 2020, the top 10 components of NikkoAM-StraitsTrading Asia ex Japan REIT ETF are as follow.
| Component | Weight (%) | Country of Operation |
|---|---|---|
| Capitaland Integrated Commercial Trust | 10.12 | Singapore |
| Ascendas Real Estate Investment Trust | 10.04 | Singapore |
| Link Real Estate Investment Trust | 9.84 | Hong Kong |
| Mapletree Logistics Trust | 7.81 | Singapore |
| Mapletree Industrial Trust | 6.63 | Singapore |
| Mapletree Commercial Trust | 6.54 | Singapore |
| Frasers Logistics & Commercial Trust | 5.15 | Singapore |
| Keppel DC Reit | 4.78 | Singapore |
| Suntec Real Estate Investment Trust | 4.32 | Singapore |
| Frasers Centrepoint Trust | 3.72 | Singapore |
As seen from the table above, the ETF is highly concentrated in Singapore at the moment. I think the the ETF is a good choice for investor who believes that REIT in Singapore is stable and will continue to improve in the long run, but would like a hedge against unforeseen decline in Singapore’s REITS.
Annual Reports and Half Yearly Reports
For ease of reference, here are all the links to download annual reports and half yearly reports from SGX website:
- Annual Report for financial period ending 30 June 2020
- Semi-Annual Report for financial year ended 31 December 2019
- Annual Report for financial period ending 30 June 2019
- Semi-Annual Report for financial year ended 31 December 2018
- Annual Report for financial period ending 30 June 2018
- Semi-Annual Report for financial year ended 31 December 2017
- Annual Report for financial period starting from 27 Feb 2017 and ending at 30 June 2018
Expense Ratio
| FY Ending | Expense Ratio (%) |
|---|---|
| 30 Jun 2021 | TBA (Sep 2021) |
| 30 Jun 2020 | 0.6 |
| 30 Jun 2019 | 0.6 |
| 30 Jun 2018 | 0.6 |
| 30 Jun 2017 | 0.6 |
Expense ratio is the expense of a Fund divided by the price. You want to invest in Funds that has the lowest expense ratio as possible, thus maximizing your gain.
The expense ratio of both SPDR STI ETF and Nikko AM STI ETF is about 0.3%. That means, NikkoAM-StraitsTrading Asia ex Japan REIT ETF is less efficient than STI ETF. However, it is comparable to Lion-Phillip S-REIT ETF, which is a Fund that tracks the top REITS in Singapore.
For me, personally, the maximum expense ratio I can tolerate when investing in a passive fund is 1%. Thus, the expense ratio of this ETF is still acceptable for me.
Tracking Error
| FY Ending | 1 Year Tracking Error (%) |
|---|---|
| 30 Jun 2021 | TBA (Sep 2021) |
| 30 Jun 2020 | 0.57 |
| 30 Jun 2019 | 0.64 |
| 30 Jun 2018 | 0.64 |
| 30 Jun 2017 | N.A. |
Tracking error is the difference of performance (return) between the ETF and the index it’s trying to mirror. You want to invest in Funds that has the lowest tracking error as possible.
The 1-year tracking error of both SPDR STI ETF and Nikko AM STI ETF is less than 0.3%, meanwhile the 1-year tracking error of NikkoAM-StraitsTrading Asia ex Japan REIT ETF is about 0.6% (which is, again, comparable to Lion-Phillip S-REIT ETF‘s tracking error).
NikkoAM-StraitsTrading Asia ex Japan REIT ETF Dividend
Here are all the dividend paid out by NikkoAM-StraitsTrading Asia ex Japan REIT ETF since 2017.
| Ex Date | Payment Date | Dividend Rate | Price during Ex-date | Yield on Ex-date |
|---|---|---|---|---|
| 4 Jan 2021 | 4 Feb 2021 | S$ 0.01120 | S$ 1.123 | 1.00 % |
| 1 Oct 2020 | 3 Nov 2020 | S$ 0.01380 | S$ 1.094 | 1.26 % |
| 1 Jul 2020 | 4 Aug 2020 | S$ 0.01550 | S$ 1.099 | 1.41 % |
| 1 Apr 2020 | 6 May 2020 | S$ 0.01460 | S$ 0.975 | 1.50 % |
| 2 Jan 2020 | 5 Feb 2020 | S$ 0.01390 | S$ 1.242 (est) | 1.12 % |
| 1 Oct 2019 | 4 Nov 2019 | S$ 0.01250 | S$ 1.261 (est) | 0.99 % |
| 1 Jul 2019 | 1 Aug 2019 | S$ 0.01130 | S$ 1.300 (est) | 0.87 % |
| 1 Apr 2019 | 6 May 2019 | S$ 0.01180 | S$ 1.226 (est) | 0.96 % |
| 2 Jan 2019 | 1 Feb 2019 | S$ 0.01380 | S$ 1.103 (est) | 1.25 % |
| 1 Oct 2018 | 5 Nov 2018 | S$ 0.01290 | S$ 1.123 (est) | 1.15 % |
| 2 Jul 2018 | 16 Jul 2018 | S$ 0.01046 | S$ 1.088 (est) | 0.96 % |
| 2 Apr 2018 | 16 Apr 2018 | S$ 0.01238 | S$ 1.102 (est) | 1.12 % |
| 2 Jan 2018 | 15 Jan 2018 | S$ 0.01117 | S$ 1.167 (est) | 0.96 % |
| 2 Oct 2017 | 16 Oct 2017 | S$ 0.01128 | S$ 1.086 (est) | 1.04 % |
| 3 Jul 2017 | 17 Jul 2017 | S$ 0.01248 | S$ 1.063 (est) | 1.17% |
Your dividend yield will depends on your buying price. For the sake of simplicity, assuming you buy the stock on its Ex-date, the annualized dividend yield of this ETF varies between 4% to 5.2%.
The dividend yield of NikkoAM-StraitsTrading Asia ex Japan REIT ETF is certainly better than STI ETF because the components of this ETF consists of REITS. REITS usually distribute 90% of their income as dividend, so it’s expected that dividend yield is on the high side compared to non-REITS stocks.
If we compare the dividend of NikkoAM-StraitsTrading Asia ex Japan REIT ETF and Lion-Phillip S-Reit ETF, the latter has dividend yield of less than 5% and a less diversified bucket. In my opinion, this ETF has slightly better dividend compared to its S-REIT cousin.
Target Price
Again, for the sake of simplicity, let’s take the latest 4 quartely dividend and divide it by your desired yield to get the target price.
If your desired dividend yield is 4%, then the target price is: (0.01120+0.01380+0.01550+0.01460)/4% = 0.0551/4% = S$ 1.378.
If your desired dividend yield is 5%, then the target price is: 0.0551/5% = S$ 1.102.
If your desired dividend yield is 6%, then the target price is: 0.0551/6% = S$ 0.918.
Risks
As with any other stocks, investing in NikkoAM-StraitsTrading Asia ex Japan REIT ETF has its own risks. Here are the risks that I can think of:
- All of the stocks in this ETF are concentrated in Asia region, with majority of the stocks in Singapore and Hong Kong. Any regional crisis or regional political instability in Asia will undoubtedly bring down the performance of this ETF.
- The Fund is traded in two different currency denominations on the SGX, the main currency is SGD while the secondary currency is USD. The price of the USD counter is affected by exchange rate. Thus, the performance of the USD counter may not be the same as the primary counter (SGD).
- Interest rates volatility. One of REIT’s main expenses is interest rate. When interest rate rises, profit will be undoubtedly affected.
- Shift in the demand for space. The global events that happen in 2020 (social distancing, rising of e-commerce, work from home) may or may not affect the demand for retail and office spaces in the future. If it does, the performance of this ETF will be affected.
Alternative Funds
If you’re not comfortable with NikkoAM-StraitsTrading Asia ex Japan REIT ETF for whatever reasons, here are some alternative funds you can consider:
- SPDR Straits Times Index ETF (SGX: ES3)
- Nikko AM Singapore STI ETF (SGX: G3B)
- Lion-Phillip S-REIT ETF (SGX: CLR)
- Phillip SGX APAC Dividend Leaders REIT ETF (SGX: BYJ)
How to Invest in NikkoAM-StraitsTrading Asia ex Japan REIT ETF
Here are several ways you can invest in NikkoAM-StraitsTrading Asia ex Japan REIT ETF:
- Buy lump-sump amount directly from brokerage
- Invest monthly through DBS/POSB Invest Saver (RSP)
My Personal Take
I love REITS funds because of their high dividend, and because they save me the hassle of trying to pick the correct REITS (which I’m really bad at).
Personally, I like this fund because it’s reasonably diversified (even though the majority of its constituents are concentrated in Singapore and HK). I’ll definitely look to invest more in global or US REITS to balance my exposure.
For me, the historical dividend yield is better compared to what I get when I picked individual REITS. So, investing in a REITS fund is obviously better than picking stocks for me. I also love the fact that this ETF is paying quarterly dividend, yay to more frequent payday!
I am currently investing in this fund through DBS RSP. Each month I contribute a few hundreds to buy this fund.
This is not an endorsement to invest in this ETF. Before you invest, do note that REITS are quite risky in nature. Your capital is not guaranteed. During economic downturn or real estate bubble, you may need years to recover your loss of investment. Only invest money that you can afford losing.
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