[SINGAPORE] Trade tensions in global markets were evident in the performance of global banks in recent weeks. The Singapore trio of DBS, OCBC and UOB averaged declines of 1.4 per cent. At the same time, recent US inflation data came in below expectations, with concerns about the weakening growth outlook in the US.
Despite the recent broad market downturn, Singapore real estate investment trusts (S-Reits) rebounded strongly with the iEdge S-Reit Index gaining close to 5 per cent over the past two weeks.
Larger market-capitalisation S-Reits have also led the sector’s recent gains. Within the Straits Times Index (STI), the seven S-Reits averaged 5.6 per cent gains over the past two weeks.
In the month to date ended Mar 20, the iEdge S-Reit Index recorded 4.8 per cent in price returns, outperforming the broader STI’s 0.9 per cent, the FTSE EPRA Nareit Asia ex Japan Reits Index’s 3.9 per cent and the FTSE EPRA Nareit Global Reits Index’s minus 3.4 per cent.
In the month to date ended Mar 20, the five S-Reits with the largest price gains within the iEdge S-Reit Index were Frasers Hospitality Trust, Frasers Logistics & Commercial Trust, CDL Hospitality Trusts, ParkwayLife Reit, and Frasers Centrepoint Trust. The five S-Reits averaged 9.3 per cent price gains.
Over the past two weeks, S-Reits also recorded net institutional inflows of about S$42 million, after close to seven consecutive weeks of net institutional outflows. The seven STI S-Reits also recorded the bulk of inflows at S$40 million of net institutional inflows. Notably, two of the seven STI Reits, CapitaLand Integrated Commercial Trust (CICT) and Frasers Centrepoint Trust (FCT), recorded the majority of net institutional inflows.
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CICT saw its FY2024 (ended Dec 31, 2024) assets under management (AUM) grow 6 per cent in 2024, with net property income (NPI) up 3.4 per cent and rental reversion up 8.8 per cent for retail and 11.1 per cent for office. Incidentally, after eight years at the helm of CICT, the Reit’s CEO Tony Tan will move on to take on the role of chief corporate officer at CapitaLand Development. He will be succeeded by CICT deputy CEO Tan Choon Siang on May 1. For FCT, excluding the impact of the divestment of Changi City Point and the asset enhancement initiative at Tampines 1, NPI was also up 3.4 per cent in FY2024 (ended Sep 30, 2024), with 7.7 per cent overall rental reversion, and AUM up 11 per cent.
At last week’s FOMC meeting, the US Federal Reserve maintained interest rates at 4.25 to 4.5 per cent. Given increased economic uncertainty, the Fed lowered its growth forecast for 2025 and raised the inflation projection. Additionally, it still anticipates two rate cuts this year.
Analysts are also issuing more favourable comments on Reits in the past week. DBS Research notes that interest rates in Singapore have retreated, with the Singapore overnight rate average and 10-year yields hitting a “Goldilocks zone” for S-Reits to refinance with savings and pursue selective growth. S-Reits are today still trading at compelling valuations, with the sector’s average distribution yield of nearly 7 per cent and price-to-book ratio of below 0.8 times, 20 per cent below its historical average.
The writer is a research analyst at SGX.
For more research and information on Singapore’s Reit sector, visit sgx.com/research-education/sectors for the S-Reits & Property Trusts Chartbook.
