Singapore REIT rally seen as rate cut speculation intensifies: DBS

Clients prefer REITs with heavy exposure on Singapore real estate.

Investor sentiment on Singapore-listed REITs has started to improve recently and is likely to continue to do so on speculation that an interest rate cut is on the horizon, according to DBS.

DBS analysts said in a note that S-REITs have already attracted investors’ attention with the index having risen 7% in the past two days. Discussions with their clients also suggest renewed confidence in and re-allocation into S-REITs.

The US Federal Reserve’s more dovish statements in recent weeks and the better-than-expected June inflation print were the main factors fueling this optimism to the sector, according to the analysts.

“We acknowledge that a change in near-term sentiment on S-REITs could result in a swing of the pendulum in the opposite direction in the immediate term,” DBS said.

“We maintain our view that a sustainable rally will need to be supported by a clearer path to normalisation, which is lacking at this moment,” it added.

DBS expects its top picks: CapitaLand Ascendas REIT, Mapletree Pan Asia Commercial Trust and Mapletree Logistics Trust, to significantly benefit from the projected rally in the near term.

The bank also saw strong preference on REITs with heavy exposure to Singapore real estate, with clients citing the strength of the SGD and the clarity of returns.