Singapore REITs outlook cloudy as rate hike looms following Trump triumph

SINGAPORE (Nov 16): Dark clouds are gathering for Singapore real estate investments trusts (REITs). And a storm could hit as early as December.

Following Donald Trump’s victory in the US presidential election, the probability of a US Fed rate hike in mid-December has surged to 92%, based on the Fed funds futures rate.

The probability of a rate hike was 11.8% at the start of July, according to OCBC Investment Research lead analyst Andy Wong Teck Ching in a Tuesday report.

“Donald Trump’s expansionary fiscal policy plans may result in interest rates rising faster than previously anticipated,” Wong says.

However, he adds that “it remains to be seen how aggressively these policies would be pushed through and whether Congress would fully support Trump’s policies”.

This could put further pressure on Singapore REITs, which already turned in “subdued” distribution per unit (DPU) performances in the quarter ended Sept.

Of the 24 Singapore REITs covered by OCBC, only Lippo Malls Indonesia Retail Trust managed to beat expectations.

On the other end, Cache Logistics Trust and CapitaLand Retail China Trust fell short of expectations.

“In line with what we had cautioned previously, operational performance was muted, given the challenging operating environment,” says Wong. “Overall DPU growth for the REITs under our coverage came in at -0.8% on a y-o-y basis.”

However, the research house is keeping its “overweight” rating on the sector.

“Investors should bargain hunt on quality REITs, especially those which have underperformed the sector,” Wong says.

OCBC’s preferred picks are Frasers Centrepoint Trust, Keppel DC REIT, Ascendas REIT, Frasers Logistics & Industrial Trust, and Mapletree Greater China Commercial Trust.

Frasers Centrepoint Trust is kept at “buy” with a fair value estimate of S$2.33. As at 11.42 a.m., units of Frasers Centrepoint Trust were trading 1 Singaporean cents higher at S$1.95.

Keppel DC REIT is kept at “buy” with a fair value estimate of S$1.35. As at 11.42 am, units of Keppel DC REIT were trading 3 cents higher at S$1.20.

Ascendas REIT is kept at “buy” with a fair value estimate of S$2.67. As at 11.42 am, units of Ascendas REIT were trading 5 cents higher at S$2.25.

Frasers Logistics & Industrial Trust is kept at “buy” with a fair value estimate of S$1.10. As at 11.42 am, units of Frasers Logistics & Industrial Trust were trading flat at 91.5 cents.

Mapletree Greater China Commercial Trust is kept at “buy” with a fair value estimate of S$1.15. As at 11.42 am, units of Mapletree Greater China Commercial Trust were trading flat at 95.5 cents. — theedgemarkets.com.sg