After trading hours yesterday evening (02 July 2020), there was a report in “The Edge Singapore” (a site which I visit on a daily basis to receive the latest business updates) that the Chief Investment Officer of the Manager of EC World REIT (SGX:BWCU), Mr Li Jinbo, is currently under probe by the Commercial Affairs Department (CAD) and the Monetary Authority of Singapore (MAS) – you can read the news article in full here.

On first look, I do not deny that my very first reaction was, “Oh crap!” (I’m sure many of you also have the same thoughts.) At the same time, I have also received a couple of messages from fellow investors asking me for my thoughts – particularly whether I will be selling my unit holdings when the market open this morning.

There’s no doubting of the fact that, on the first look, this piece of news look like a negative for the REIT. However, if you continue reading the article in full, you will find two things:

  • There was no mentioning about why Mr Li was under probe (whatever you may have read on the various investment forum are nothing more than just pure speculations), and
  • CAD indicates that “EC World REIT and the manager of the REIT” are not under investigation (this point in particular is important to take note of.)

On top of that, there was also an announcement posted by the REIT in relation to this (you can read the announcement in full here), and from my understanding:

  • EC World REIT shared that they have received a letter from the CAD and MAS, requesting that the REIT provide certain information, documents, and electronic devices in relation into an offence under the Securities and Futures Act.
  • Currently, Mr Li is on a leave of absence, and his appointment will be reviewed when there is sufficient information made available.
  • Most importantly, in the announcement, I noted that the “business and operations of EC World REIT have not been affected as Mr Goh Toh Sim, CEO of the Manager, has been overseeing the Investment and Asset Management function of the Manager and the EC World REIT since IPO. Mr Goh will continue to actively perform these functions.”

After giving the matter some thought last evening, I have decided to continue remaining invested in the REIT, because at this point in time:

  • There are no evidences to suggest that the REIT’s business fundamentals have been damaged as a result of this piece of news,
  • CAD mentioned that EC World REIT and the Manager of the REIT are not under investigation – and this means that the reason Mr Li was under probe may very well be due to something which only he himself may be liable of (my own opinion here),
  • EC World REIT have also mentioned in the announcement its businesses and operations have not been affected.

Having said that, I will also not be adding on to my unitholding at this point in time (despite the unit price plunging by 15% from yesterday’s closing price of S$0.665 to S$0.560 at the time of writing) as I would like to get more clarity on the matter (I will be following the developments closely and will provide more information if I have any.) I am expecting the REIT to provide an update on this matter when they report their second quarter results ended 30 June 2020.

With regard to the unit price of the REIT plunging, I have expected this to happen as a result of this negative piece of news. And moving forward, I expect the unit price movement to suffer from further weakness, as traders may take full advantage to “short” the REIT (for the benefit of those who do not know what “short” is, it means to first sell a company’s shares first, before buying back later on – such trading comes with huge risks and I do not recommend you to do so if you are not good in technical analysis. Also, in case you’re wondering, I have no intention to perform any “short” trade on the REIT.)

All of the above is solely my personal opinion on the matter to share (for educational purposes only.) They certainly do not imply that you make the same investment decision as me (i.e. to continue staying invested in the REIT, and at the same time, not adding on to my current unitholding.)

Everyone thinks and acts differently as far as investing is concerned, and my best advice to you is to do what you feel you are most comfortable with – but at the same time, I’d like to urge you to not act on impulse; give the whole matter a good think through in a rational manner before you make your final decision.

I hope you find this post useful, and here’s wishing you a great weekend ahead. 🙂

Disclaimer: At the time of writing, I am a unitholder of EC World REIT.

 

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