In this issue:

• How to ride the bucking bronco of oil prices
• A rough start for UI Boustead Reit

And so I’d half-watched my portfolio turning red one day and black the next, the market yanked this way and that by a war with no defined purpose or conclusion. 

I’d also wondered idly about the people who were trading the twists and turns of the oil market – did they need a neck brace for all the whiplash they’d sustained as oil prices pinged between US$119 and US$78 a barrel?

But if punters had picked any of these 15 Singapore stocks in the last fortnight, they would’ve been amply rewarded – palm oil plantation firm Kencana Agri came out on top, gaining some 46 per cent since war broke out in the Middle East. 

For a while last week, reprieve had looked imminent when the International Energy Agency announced the largest release of oil reserves in its history to ease the Strait of Hormuz’s chokehold on supply. 

But a fat lot of good that’s done, especially since Iran has doubled down, attacking merchant ships and telling the world to brace itself for oil at US$200 a barrel. 

US$200 a barrel does not even bear thinking about – the highest analyst estimates right now top out at about US$150 a barrel. 

In any case, it takes all sorts to make up a market, and there’s plenty of room to do nothing, do something, or strike some sort of balance in between.

If you’re the Do-Something sort of investor

You have a whole range of Do-Somethings to choose from, depending on your risk appetite. 

On the aggressive end of things, I’ve heard of a contrarian trade in Singapore Airlines (SIA) being mooted – the airline’s share price has been dinged almost 9 per cent since the US attacked Iran. Among the Asian carriers, SIA is better protected against fuel price spikes – it typically hedges almost 50 per cent of its fuel over the next three months. The longer the war lasts and the further oil prices run up and away from expectations, though, the more contrarian this trade will look. 

If the conflict becomes a prolonged one, investors could go shopping in the agribusiness and capital goods stocks section. Higher energy prices and freight rates could push up earnings forecasts for firms such as Yangzijiang Shipbuilding, Sembcorp Industries and China Aviation Oil, according to CGS International analysts. The research house has “add” ratings on all three counters. 

On the other hand, if you’d rather be taking cover, UOB Kay Hian has singled out Centurion Accommodation Reit, Keppel DC Reit and Parkway Life Reit as vehicles with “one-of-a-kind assets that could weather a downturn”. The research outfit also included construction players such as Pan United and Hong Leong Asia, consumer stocks DFI Retail and Sheng Siong, and Raffles Medical in healthcare as among its stock picks in defensive sectors.

If you’re the Sit-Tight sort of investor

This section, which explores doing nothing, ought to be empty by definition. But there’s a surprising amount to be said on the matter. 

For better or for worse, this isn’t the market’s first time at the war-and-oil rodeo, so we have a wealth of data that shows how stock markets generally trade higher in the year after an oil shock happens. 

In fact, an analysis of previous US-led attacks that lasted more than a day found that on average, the S&P 500 was 12.5 per cent higher a year after those attacks began. 

Pulling cash out of your portfolio could end up costing you dearly in the long run. Research shows that investors who moved into cash in volatile times and then moved back into stocks when volatility fell would have reduced their returns by nearly 80 per cent since 1990. 

“Even trying to be ‘disciplined’ with this turmoil-avoiding strategy – and moving into cash only when the Vix (a measure of volatility) was in the top 5 per cent of its historical range – wouldn’t fare much better,” said Duncan Lamont, Schroders’ head of strategic research. 

“That approach would still cut nearly in half the returns that could have been realised… The most rewarding strategy was to stay fully invested and not react to the volatility.”

When it doesn’t matter what sort of investor you are

There is, however, a separate argument to be made for cash and caution. For most people, the stock market doesn’t form the bulwark of their economic welfare – their job does.

“(Oil) price spikes have a nasty habit of marking the end of the cycle or coinciding with recessions,” a CGS International note said last week. 

The stock market might be able to shrug off a disruption to oil supply, but the oil market tends to carry the scars of a shock for far longer. Research has found that a year after the start of US military action, the price of Brent crude – a global benchmark for oil – has been 27 per cent higher on average. 

When oil is a lot more expensive for a prolonged period, it tends to be trailed by two undesirable companions: inflation and recession. 

In Singapore, an increase in the average crude oil price from US$63 per barrel to US$92 per barrel could raise 2026’s headline inflation rate from about 1.3 per cent to about 1.8 per cent year on year, by OCBC Group Research’s reckoning. Not terrible, but not fun either.

And if soaring oil prices tip the region into a recession, it won’t be investment portfolios that keep people up at night, but their pocketbooks and pay cheques as prices rise and jobs are lost. In such dire times, cash will be king.

Spiking oil prices and the accompanying spectre of higher interest rates are decidedly unwelcome bedfellows for real estate investment trusts (Reits). Since the hostilities in the Middle East began, the iEdge S-Reit Index has shed some 5 per cent as investors fret about borrowing costs and a slowdown in demand.

And it was into this sorry situation that UI Boustead Reit made its trading debut last Thursday, culminating in a sorrier closing price of S$0.805 – 8.5 per cent below its initial public offering (IPO) price of S$0.88. 

The IPO also happened to be Singapore’s first mainboard and Reit listing of 2026. This year is supposed to be a better one for listings compared to 2025, with about 20 IPOs expected to materialise. 

Hopefully, Singapore’s first mainboard listing of the year is one of those instances where one does not, in fact, begin as one means to go on. 

(Disclosure: I own units in Keppel DC Reit and Parkway Life Reit.)