MONTHLY FUND REVIEW
All data as at 31 December 2012 unless otherwise stated
Eastspring Investments
– Asian Property Securities Fund
1
2
FUND UPDATE
Investment objective
Eastspring Investments – Asian Property Securities Fund (the “Fund”) aims to maximize income and longterm total return by investing primarily in listed closed-ended Real Estate Investment Trusts and securities
of property-related companies, which are incorporated, listed in or have their area of primary activity in the
Asia Pacific Region. The Fund may also invest in depository receipts including American Depository
Receipts (ADRs) and Global Depository Receipts (GDRs), debt securities convertible into common shares,
preference shares and warrants.
COMMENTARY
Market overview3
Australia’s REITs rose in December but underperformed the broader market for a second consecutive
month in line with most defensive stocks which lagged. The 19-member S&P/ASX 200 AREIT index rose
1.29% in December from the previous month when it fell 1.34%. It underperformed the broader S&P/ASX
200 index which gained 3.17% from the previous month when it declined 0.24%. Investors seem to rotate
out of REITs to materials and banks.
Japan’s real estate stocks outperformed REITS and the broader market in December.
The Topix Real Estate Index (TPREAL) advanced for a fourth consecutive month in December, up
23.49%, its biggest month-on-month gain since April 2008 when it surged 26.45%, The Topix Real Estate
Investment Trust (TSREIT) rose for a fifth month in a row, up 4.58%. The broader Topix index gained
10.02% in December.
In Singapore, property developers and real estate investment trusts extended gains for a
seventh consecutive month in December. Property developers outperformed REITS and the broader
market in Singapore. The city state’s real estate counters are seen as proxies for Asian markets given that
real estate firms have expanded outside of the city state. Positive China economic data and cautious
optimism towards navigating the US fiscal cliff contributed to the Singapore market’s gains. Specifically, the
FTSE Straits Times Real Estate Index (FSTRE) rose 4.35%, outperformed both the FTSE Straits Real
Estate Investment Trust (FSTREI) and the broader Straits Times Index (FSSTI) which added 2.31% and
3.16%, respectively, during the month.
Hong Kong’s property developers outperformed property investors in December but both lagged the
broader market amid reports that China’s new leaders may accept slower economic growth and a more
sustainable growth model. Favorable Chinese economic data and further quantitative easing by the US
Federal Reserve propped up the Hong Kong equity market in December but gains were capped by
uncertainty about the US resolution to the fiscal cliff. The Hang Seng REIT fell for the first time in
December after sixth consecutive months of gains while the Hang Seng Property Index gained 1.54%. The
Hang Seng Index advanced 2.84% during the month.
Fund performance
The Fund returned 0.3% and outperformed the benchmark by 0.2% in December. Since inception, the Fund
has outperformed the benchmark by 1.7% p.a.
Total return, USD (%)
FUND PERFORMANCE
50
1 month
3 months
1 year
39.2
40
31.2
3 year*
5 years*
Since Inception*
35.0
30
20
14.8
10
17.1 15.8
5.1 4.5
0.3 0.1
0.0 1.0
0.8
0
-0.1
-10
-4.7
Fund (Offer-to-bid)
-0.4
Fund (Bid-to-bid)
-0.9
-0.7
MSCI AC Asia Pacific REIT Index
Source: Eastspring Investments (Singapore) Limited and RIMES. Class A share class; USD; net income
reinvested; Offer-bid includes 5.0% Initial Sales Charge w.e.f. 01 Aug 12 and 5.75% Initial Sales Charge
prior to 01 Aug 12. Inception Date: 28 Feb 07 *Annualised. Benchmark: MSCI AC Asia Pacific REIT Index.
Past performance is not necessarily indicative of the future or likely performance of the Fund.
Key contributors to performance
The Fund’s underweight position in The Link REIT was a key contributor in December. Investors could be
rotating out of the defensive names as risk appetite continues to improve. Lend Lease did well during the
month as a consortium it led was selected as the preferred bidder for the new $1bn Sydney convention
project. This will further boost Lend Lease’s project pipeline. CapitaRetail China Trust’s share price rose
possibly as an indirect beneficiary of the positive economic data coming from China during the month.
Key detractors from performance
Stockland was up slightly even after it indicated that the earnings for FY13 will be at the lower end of their
previous guidance due to the softness in the Victorian residential market. The Fund was underweight in
Stockland which detracted relative performance during the month. Pakuwon Jati, a new off benchmark name
included in the portfolio during the month, dipped slightly, possibly on profit taking given that the stock has
done very well this year. Fortune REIT declined during the month, possibly due to profit booking after a
good run over the year.
Changes to the portfolio
Given the new benchmark that will be in place effective from 1 January 2013, the fund manager took the
opportunity to exit all five Japanese REITs and used most of the proceed to fund new positions in Franshion
Properties, Asian Property Development and Pakuwon Jati at valuations which the fund manager believes
still offer good upside. A brief profile of the three companies are provided below.
Franshion Properties – The company is the property subsidiary of Sinochem, a state-owned enterprise in
China. It is a developer known for developing large scale, high-end commercial real estate in the country.
While its residential development track record is relatively short, launches in recent years are met with
success. The company also has large, good quality land bank and has strong relationship with local
governments.
Asian Property Development – It is a property developer based in Thailand focused on developing residential
projects mainly in Bangkok. Specifically, the developer has two main projects – one located within 10 km and
the other located within 20 km radius of the central business district. The former project targets high income
group while the latter targets middle income group.
Pakuwon Jati - The company is an Indonesia property developer of residential buildings, offices, shopping
centres, townships and hotels located in Surabaya and Jakarta. It is expected to be a beneficiary of strong
demand for office and residential space in Surabaya driven by rising income, foreign direct investment
inflows and business expansion.
Strategy and outlook
The fund manager continues to keep a strong eye on relative valuations which have tended to outperform in
the medium term. Specifically,
For Australia, the fund manager is getting more constructive on Australian REITs given the lower interest
rate outlook and relatively more attractive valuations compared to REITs in Hong Kong and Singapore which
had run up a lot during the year.
For HK, the fund manager remains convinced that the underlying residential prices in Hong Kong will
continue to be robust, and developer balance sheets are strong enough to take advantage of landbanking
and healthy asset turns. This is despite the negative noise around policies – which has had limited
fundamental impact. As a result, the Fund remains weighted in Hong Kong.
For Singapore, the Fund continues to stay invested in resilent high dividend names but is underweight
residential property due to the downside risks in residential prices.
Regionally, the Fund will continue to recycle out of defensive more expensive REIT names, especially in
Singapore and Hong Kong, to selective residential and landlord plays. The fund manager may build up more
positions in Asean property names where economic growth is more supportive, consumer debt is lower and
provides more opportunity for sustained long term growth.
** Country classification by MSCI
Notes:
1. Lipper Leaders fund ratings do not constitute and are not intended to constitute investment advice or an offer to sell or
the solicitation of an offer to buy any security of any entity in any jurisdiction. As a result, you should not make an
investment decision on the basis of this information. Rather, you should use the Lipper ratings for informational
purposes only. Certain information provided by Lipper may relate to securities that may not be offered sold or delivered
within the United States (or any State thereof) or to, or for the account or benefit of, United States persons. Lipper is
not responsible for the accuracy, reliability or completeness of the information that you obtain from Lipper. In addition,
Lipper will not be liable for any loss or damage resulting from information obtained from Lipper or any of its affiliates. ©
Thomson Reuters 2011. All rights reserved. Data as at 31 December 2012.
2. © 2011 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or
its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely.
Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this
information. Data as at 31 December 2012.
3. Market data from Bloomberg, 31 December 2012
CONTACT DETAILS
Eastspring Investments (Singapore) Limited (UEN: 199407631H)
10 Marina Boulevard, #32-01 Marina Bay Financial Centre Tower 2, Singapore 018983
Tel: 6349 9711 Fax: 6509 5382
www.eastspringinvestments.com.sg
Important Information
This document is solely for information and may not be published, circulated, reproduced or distributed in whole or part
to any other person without the prior written consent of Eastspring Investments (Singapore) Limited (“the Manager”)
(UEN: 199407631H). This document is not an offer or solicitation of an offer for the purpose of investment units in the
Fund and nothing herein should be construed as a recommendation to transact in any investment product. Please note
that the securities mentioned are included for illustration purposes only. It should not be considered a recommendation to
purchase or sell any particular security. The securities discussed do not represent the fund's entire portfolio and in the
aggregate may represent only a small percentage of the Fund's portfolio holdings.
The fund(s) mentioned in this document is(are) sub-fund(s) of Eastspring Investments (“the SICAV”), an open-ended
investment company with variable capital (société d’investissement à capital variable) registered in the Grand Duchy of
Luxembourg on the official list of collective investment undertakings pursuant to part I of the Luxembourg law of 17
December 2010 relating to undertakings for collective investment (the "2010 Law") and the Directive 2009/65/EC of the
European Parliament and of the Council of 13 July 2009 (the "UCITS Directive").
Investors should be aware that investment in property is a long-term undertaking and there are specific risks associated
with investment in real estate investment trusts and property related securities of companies. These include the cyclical
nature of the real estate market, exposure to domestic and global macroeconomic cycles, increases in interest rates,
fluctuations in security prices owing to stock market movements and changes in investor sentiment, increases in property
taxes and operating expenses, depreciation in the value of buildings over time, variations in property prices and rental
income, changes in district values, changes in government policies with regards to real estate, regulatory limits on rents,
changes in zoning laws, environmental risks, related party risks, losses generating from casualty and natural
catastrophes (e.g. earthquakes), and changes in other real estate capital market factors.
Investors should note that the net asset value of this Fund is likely to have a high volatility due to its investment
policies or portfolio management techniques. The Fund may use derivative instruments for efficient portfolio
management or hedging purposes.
A prospectus in relation to the Fund is available and a copy of the prospectus may be obtained from the Manager and its
distribution partners. Investors should read the prospectus before deciding whether to subscribe for or purchase units in
the Fund. All application for units in the Fund must be made on the manner described in the prospectus. The value of
units in the Fund and the income accruing to the units, if any, may fall or rise. Past performance of the Fund/manager is
not necessarily indicative of the future performance of the Fund. The prediction, projection or forecast on the economy,
securities markets or the economic trends of the markets targeted by the Fund are not necessarily indicative of the future
or likely performance of the Fund. An investment in the Fund is subject to investment risks, including the possible loss of
the principal amount invested. Investors may wish to seek advice from a financial adviser before making a commitment
to invest in units of the Fund Whilst the Manager has taken all reasonable care to ensure that the information contained
in this document is not untrue or misleading at the time of publication, the Manager cannot guarantee its accuracy or
completeness. Any opinion or estimate contained in this document is subject to change without notice. The Manager is
an ultimately wholly-owned subsidiary of Prudential plc of the United Kingdom. Eastspring Investments (Singapore)
Limited and Prudential plc are not affiliated in any manner with Prudential Financial, Inc., a company whose principal
place of business is in the United States of America.
MM379/250113