Putting Trust in REIT stocks (General)

Brokers' take: DBS positive on S-Reits, says interest rate risk is mispriced

DBS Group Research on Monday (Feb 14) said investors should start to accumulate on Singapore-listed real estate investment trusts (S-Reits) on the back of strengthening fundamental data points noted in recent results and meetings.

The research team is positive on S-Reits and believes the impact on interest rates is more muted than what the markets are currently pricing in and expecting.

Recent share price weakness in S-Reit has widened the sector's yield spread to about 4.2 per cent - 1 standard deviation lower than its 10-year mean, DBS said in a report.


Retail interest picks up in S-Reit ETFs

SINGAPORE continues to lead the Asia ex-Japan region as the largest Reit exchange traded fund (ETF) market following the listing of CSOP iEdge S-Reit Leaders ETF CSOP iEdge SREIT ETF S$: SRT -1.16% and the UOB APAC Green Reit ETF UOB AP GRN REIT S$: GRN -1.1% on the Singapore Exchange last year.

Together with the two new listings, the 5 Singapore-listed Reit ETFs now have combined assets under management (AUM) of close to S$800 million, which has more than doubled since January 2020.

The 2 ETFs with 100 per cent focus on S-Reits - Lion-Phillip S-Reit ETF LION-PHILLIP S-REIT: CLR -0.99% and CSOP iEdge S-Reit Leaders ETF CSOP iEdge SREIT ETF S$: SRT -1.16% - recorded a combined AUM of S$353 million while the other 3 ETFs which offer Asia and Asia-Pacific exposure - NikkoAM-StraitsTrading Asia Ex Japan Reit ETF Nikko AM STI ETF: G3B -0.29% , Phillip SGX APAC Dividend Leaders Reit ETF PHIL AP DIV REIT US$: BYI 0% and UOB Asia Pacific (APAC) Green Reit ETF UOB AP GRN REIT S$: GRN -1.1% - recorded S$437 million of combined AUM.


Many funds have been selling REIT and tech stocks, and bought Banks stock over the past three weeks..

RHB expects S-REITs to navigate through interest rate hikes ahead
RHB Group Research analysts remain overweight on Singapore REITs (S-REITs), with average yields at 5.8%

RHB Group Research analysts Loong Kok Wen, Vijay Natarajan and Raja Nur Aqilah Raja Ali remain overweight on Singapore REITs (S-REITs), with average yields currently at 5.8%.

Of the S-REITs, the analysts have indicated their top picks as Ascendas REIT, Suntec REIT, and ESR REIT.

“Despite the impending interest rate hike, we believe S-REITs will still outperform, due to stronger growth prospects as the economy reopens, and better demand and supply dynamics, which underpin healthy rental reversions,” say the analysts.

Although interest rate hikes are generally unfavourable to REITs, the analysts think the impact is lesser for S-REITs given the expectation of a stronger economic rebound, as well as earnings growth for the sector.


Delay in GST hike a short boost for retail REITs

Singapore REITs (S-REITs) with retail exposure are expected to see a short boost this year, thanks to the government announcing a delay in the goods and services tax (GST) hike.

In its latest Budget 2022 announcement on Feb 18, finance minister Lawrence Wong announced a happy surprise for Singaporeans. The inevitable increase in GST will once again be delayed. The current GST rate of 7% will increase to 8% from Jan 1, 2023 and again to 9% from Jan 1, 2024.

The government first mentioned to increase GST during Budget 2019, but this move has been delayed several times due to the Covid-19 pandemic. This will be the first time in 15 years that Singapore raises its GST.

To that end, DBS Group Research and RHB Group Research both believe that this will give a short-term boost to local retail REITs as consumers frontload their spending this year.

“The delay [in GST hike] to Jan 2023 is a pleasant surprise. Retail sales will benefit from front loading of purchases this year while an anticipated inflow of tourism receipts should see more traction from 2H2022. We remain positive on REITs with retail exposure such as Frasers Centrepoint Trust (FCT), CapitaLand Integrated Commercial Trust (CICT), Lendlease Global Commercial REIT (LREIT) and Suntec REIT,” say DBS analysts Yeo Kee Yan and Woon Bing Yong.


S-Reits remain optimistic about 2022 growth

THE Straits Times Index (STI) gained more than 5 per cent in the 2022 year to date (YTD) till Feb 24, while the iEdge S-Reit Index declined close to 4 per cent during the same period amid expectations of rate hikes.

During last week's Thursday (Feb 24) session after Russia's announcement of a military operation in Ukraine, the STI and iEdge S-Reit Index dipped more than 3 per cent and close to 2 per cent respectively. Despite the decline, the STI maintained its position as one of the best performing indices globally in 2022.

Similarly, the iEdge S-Reit Index is also one of the most resilient Reit benchmarks this year, outperforming the FTSE EPRA Nareit Developed Index which declined more than 8 per cent in the 2022 YTD till Feb 24.


Rising inflation ‘valid concern’ for S-REITs, with some mitigating factors: OCBC

The team at OCBC Investment Research (OIR) says it foresees higher inflationary pressures to be a concern on the impact of margins on the Singapore REITs (S-REITs) sector.

Amid the inflationary pressures, interest rates are poised to increase further as central banks are likely to raise their benchmark rates in 2022, notes the team.



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