Q. “Hi Timon, I see the FTSE 100 has reacted in a positive manner based on the new stimulus measures that China has proposed. Do you think this will play a role in the FTSE 100 rally that you’re expecting?”

A. Oh yes absolutely.
Just to let the readers know, China is about to embark on a 1 trillion-yuan ($137bn) stimulus package.

This issuance in government debt will be spent on major infrastructure and construction projects.

And that means more demand for commodities like metals and raw materials.

When this was announced, we saw a run up from mining companies (listed on the FTSE 100) like Anglo American, Angofagasta and Rio Tinto.

And this will therefore play a role in the FTSE 100.


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Q. “Timon there have been recent talks about investors starting to have more confidence in buying REITs again. Could you briefly explain what a REIT is, how they work and whether you would invest in them?”

A. Let’s start with the basics:

REITs stands for ‘Real Estate Investment Trusts’.

These are essentially property companies that are listed on the stock market.

So how do they work?

Step 1: An individual decides to invest in a REIT company.

Step 2: The money is then collected into a large pool (like all trusts).

Step 3: The pooled money is then invested into the property that the company either owns, operates or finances.

Step 4: Over time the company starts to make revenue and profit.

Step 5: The profits are then accounted and collected.

Step 6: The profits are then distributed in parts to the initial investors who
helped finance the company through a REIT.

Sounds great in theory…

But in reality, there is always a catch…

And that catch is timing.

The Big five SA REITs have lost over R100bn in value since 2018.

The BIG five REITs are:

1. Growthpoint
2. Redefine
3. Resilient
4. Vukile and
5. Hyprop.

Of course, this could be seen as an opportunity but there are several other factors we need to consider before deciding the best time to trade this type of asset.

It’s on my watchlist here at Red Hot Trader and I’ll be sure to let members know when my system gives me the green light on this investment.

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