Investors pool cash into S-REITs amidst dovish Fed stance

Sector yield spread of 4.2% is above the 10-year average of 3.8%.

Trailing only behind healthcare as the sector with the best performance in the second half of 2018, S-REITs are set to retain investor interest as bond yields remain pressured by the Fed’s dovish position, according to DBS Bank Research.

The yield spread of S-REITs rose to 4.2% which is above the 10-year average of 3.8% as the US 10-year yield fell 64bps to 2.59% and the MAS 10-year yield fell by 59bps to 2.05% in recent months.

“Giving the uncertain macro growth environment, we prefer the more resilient retail and industrial (warehouse and business parks) subsegments given their domestic focus and relatively stickier demand respectively,” analyst Kee Yan Yeo said in a report.

DBS' top picks include CapitaLand Mall Trust (CMT), Mapletree Commercial Trust (MCT), Mapletree Logistics Trust (MLT), Frasers Logistics & Industrial Trust (FLT) and Mapletree North Asia Commercial Trust (MAGIC).

Also readRetail REIT recovery drags on amidst sluggish sales and traffic

The cooling measures announced in July have also had little to no impact on REITs compared to property developers. This was evident as the FTSE Straits Times REIT Index outperformed the FTSE Straits Times Real Estate Holding & Development Index in mid-July 2018, data from Bloomberg show, as property stocks have declined 5.4% whilst REITs were able to eke out a measly 1% gain over the same period.

The S-REIT sector has expanded by more than 200% over the past decade, data from SGX Research show. It ranks third largest in Asia and sixth globally as of February 2018 with a market cap of US$53b, according to boutique real estate fund manager Q Investment Partners.

The Singapore economy is increasingly displaying signs of transitioning from early to mid-contraction phase following the STI downtrend in the 2H2018. At such point in the economic cycle, consumer staples and telcos cede the crown to the utility sector (Sembcorp Industries and Netlink Trust) given its tendency to outperform - a feat that could possibly extend until Q2 2019.

Although there are tentative signs of an improvement in the macro-environment with a possible meeting between Trump and the Chinese vice president, Yeo is still adopting a more guarded stance for his stock preference.

“Thus, we continue to prefer stocks with earnings visibility as well as yield plays with growth. Our picks are ST Engineering and Yangzijiang for the former and ComfortDelgro, CMT, MLT, Netlink Trust and UOB for the latter,” he said.

Join Singapore Business Review community
Since you're here...

...there are many ways you can work with us to advertise your company and connect to your customers. Our team can help you dight and create an advertising campaign, in print and digital, on this website and in print magazine.

We can also organize a real life or digital event for you and find thought leader speakers as well as industry leaders, who could be your potential partners, to join the event. We also run some awards programmes which give you an opportunity to be recognized for your achievements during the year and you can join this as a participant or a sponsor.

Let us help you drive your business forward with a good partnership!

One in 900 job vacancies requires new hires to be vaccinated.
DairyFarm showed the most growth.
ARA LOGOS is currently on the 13th spot.
Meanwhile, the demand for petrochemical exports benefitted from this same crisis.
This is expected to speed up the electronic exchange of trade documents.
This is in support of achieving Absolute Zero Carbon by 2040.
Adults will only shop if goods are discounted by at least 48%, survey says.   About 54% of 1,001 Singaporean adults have plans to shop during the Black Friday sales but only if prices of goods are discounted by at least 48%, a survey from Finder.com showed.
This move is in line with its goal to accelerate recommerce growth in SEA.
The notes were released under its $3m Multicurrency Medium Term Note Programme.
Singtel showed the most growth.
Re-exports also saw an increase of 16.4% in the same month.
The marine company apologised to its workers at the dorm.
SG electricity demand peaked at 7,667MW in October 2021.
The two aim to accelerate the progression of AI.
It will focus on sustainable opportunities for companies in Singapore.