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Stay the course

Stay the course

  • June 2025
  • By OCBC
  • 10 mins

Market attention on the US may have shifted from tariffs to its fiscal position, as the Trump administration puts forth its first budget bill of the term, but tariffs remain an uncertainty for investors grappling with ever-changing announcements around trade policies. There are also potential implications for the US’ fiscal outlook and monetary policy to contend with, as the Senate deliberates the tax and spending bill recently passed by the House. Investors need to be wary of continued market turbulence and focus on diversification and active portfolio management.

Structured Investments

Theme: Attractive valuations in Singapore

With strong fundamentals, a strategic location, and a robust financial sector, Singapore is well positioned to navigate the complexities of the global economy.

  • United Overseas Bank Ltd (UOB) has a growing regional footprint and a digital strategy that will provide more opportunities for its expanded consumer business. UOB’s share buyback reflects the management’s confidence in its earnings outlook, where the bank has guided for high-single-digit loan growth and double-digit fee growth this year.
  • SATS Ltd has shown resilience, staying above 2024 lows even during the US Liberation Day drawdown. Its growing market share is expected to enhance earnings for FY 2026. Since 3Q FY 2024, SATS's cargo tonnage has outpaced global demand, indicating market share gains that may offset global cargo weaknesses in FY 2026. Despite rising US trade tensions post-Donald Trump's “Liberation Day,” SATS has maintained consistent volume growth, likely due to supply chain re-routing and front-loading from the temporary US-China trade truce.

Bonds

AIMS APAC REIT (AAREIT) is structured as a real estate investment trust (REIT), with a primary investment goal of acquiring and managing a diversified portfolio of income-generating industrial real estate assets throughout Asia Pacific (focused on Singapore and Australia). This includes investments in warehouses and logistics centres, industrial facilities, business parks, and high-tech spaces.

AIMS APAC REIT (SGD)

This perpetual pays a distribution rate of 5.375% p.a, with a call date on 1 September 2026.

AAREIT’s FY2025 gross revenue and net property income rose by 5.3% and 2.1% year-on-year, driven by higher rental and recoveries from AAREIT’s properties in Singapore . As of 31 March 2025, the overall portfolio occupancy was 93.6%, down from 97.8% a year earlier, primarily due to a decline from the logistics & warehouse as well as industrial segments in Singapore.

Although 47.2% of AAREIT’s FY2025 gross rental income is derived from the logistics & warehouse sector, which is more exposed to potential international trade disruptions, we understand from management that a preliminary estimate of AAREIT’s top 20 tenants, which together are significant contributors to AAREIT’s portfolio, indicates that less than 10% of AAREIT’s revenue is exposed to exports to the US.

Funds

Multi-asset Funds

Lion-Bank of Singapore CIO Supertrends Multi Asset Fund

The Lion-BOS CIO Supertrends Multi-Asset Fund is a multi-asset strategy that aims to provide income and long-term capital growth by investing in a diversified portfolio of asset classes including global equities, ETFs, global bonds, the writing of equity covered call options and other collective investment schemes. Guided by research from Bank of Singapore’s award-winning Chief Investment Office, the fund takes a rigorous research-based approach to identify quality companies within equities and fixed income with resilient business models and robust fundamentals. The fund also has distribution share classes for investors looking for dividend income.

PIMCO Balanced Income & Growth Fund

The PIMCO Balanced Income & Growth Fund is a global multi-sector strategy that seeks to combine PIMCO’s total return investment process and philosophy with income maximisation. The portfolio construction is founded on the principle of diversification across a broad range of equity and global fixed income securities. The fund has a historical annualised dividend yield of 7.15% p.a.

Note: Past performance figures do not reflect future performance. Dividend figures are from Bloomberg, as of 30 May 2025.

Bond Funds

PIMCO GIS Income Fund

The PIMCO GIS Income Fund is designed for investors who seek steady income with a secondary goal of capital appreciation. It takes a broad-based approach to investing in income-generating bonds. The fund aims to achieve this by employing PIMCO’s best income-generating ideas across global fixed income sectors. The fund has a historical annualised dividend yield of 6.62% p.a.

Note: Past performance figures do not reflect future performance. Dividend figures are from Bloomberg, as of 30 May 2025.

M&G (Lux) Optimal Income

The M&G (Lux) Optimal Income Fund is a global bond fund that aims to provide a combination of capital growth and income to deliver a return based on exposure to optimal income streams in investment markets, while applying environmental, social and governance (ESG) criteria. The fund has a historical annualised dividend yield of 6.04% p.a.

Note: Past performance figures do not reflect future performance. Dividend figures are from Bloomberg, as of 30 May 2025.

Equity Funds

AB Low Volatility Equity Portfolio Fund

The AB Low Volatility Equity Portfolio fund is a global equity fund seeking capital growth through securities of companies that the fund manager believes have lower volatility. Its investment approach focuses on quality, stability and price, where the fund seeks high quality stocks of companies with stable performance and predictable earnings, trading at attractive prices. The fund also has distribution share classes for investors looking for dividend income.

Neuberger Berman Global Equity Megatrends Fund

The Neuberger Berman Global Equity Megatrends fund seeks to achieve long-term capital appreciation through investment in a high conviction, global all-cap equity portfolio of an expected 20-30 companies that are directly supported by multiple long-term, global secular shifts. The investment team follows a risk-managed approach to develop conviction, with particular focus on valuation discipline.

LionGlobal Asia Pacific Fund

The LionGlobal Asia Pacific Fund invests primarily in the equities markets of the Asia Pacific (ex-Japan) region across both emerging and developed markets, with no target industry or sector. The fund aims to achieve capital appreciation by adopting a disciplined investment process and a high conviction approach, focusing on identifying growth opportunities at reasonable prices.

Currencies

The US Dollar (USD) was choppy in May, driven by tariff de-escalation (as the US and China struck a temporary 90-day truce) and then re-escalation (as US threatened a 50% tariff on EU imports and a 25% tariff on smartphone makers if smartphones are not manufactured in America). President Donald Trump’s tax & spending bill and Moody's downgrade of the US credit rating have also cast a long shadow over US fiscal sustainability. These factors, combined with policy unpredictability surrounding Trump’s tariffs and the erosion of US exceptionalism, could further undermine sentiment and confidence in the USD. If the “sell USD” trade remains alive amid diversification flows, alternative reserve currencies, including the EUR, may benefit.