10 biggest S-REIT movers on 19 September

Source: Company filings, Bloomberg, SGX. Data as of 19 September 2024, in Singapore dollars. Distribution yields and gearing ratios are taken from S-REITs & Property Trusts Chartbook 2Q24.

After the recent softening in jobs data and inflation figures, the US Federal Reserve declared its first rate reduction in four years, decreasing the overnight borrowing rate by 50 basis points or half a percentage point, in line with market expectations. This brings the fed funds rate to a range of 4.75 to 5 per cent.

The Fed has indicated additional rate cuts, forecasting another 50 basis points this year, a full percentage point in 2025, and half a percentage point in 2026. However, the Fed has also raised its projection for the longer run rate to 2.9 per cent from 2.8 per cent, which is significantly higher from 2.5 per cent in December 2023 and the highest since 2018.

Locally, the iEdge S-REIT Index rose 1.7 per cent on 19 September following overnight developments. Across all S-REITs and Property Trusts, there were 30 advancers, 5 decliners and 4 that remain unchanged. The 10 biggest gainers averaged 3.4 per cent in price gains and majority were S-REITs with overseas assets. Up until 19 September, the iEdge S-REITs Index has achieved a total return of 5.8 per cent for the year-to-date.

In terms of fund flows, S-REITs recorded net institutional inflows of $10.7 million on 19 September while retail recorded net outflows of $2.1 million. The five S-REITs that recorded largest net institutional inflows were Suntec REIT, Mapletree Logistics Trust, CapitaLand Integrated Commercial Trust, Mapletree Pan Asia Commercial Trust and Mapletree Industrial Trust. Similarly, the five S-REITs that recorded largest net retail inflows were Frasers Centrepoint Trust, ESR-LOGOS REIT, Paragon REIT, Mapletree Industrial Trust, and CapitaLand Ascendas REIT.

Global REITs have been on the move as central banks recalibrate, setting a more favourable backdrop for policymakers and investors. The FTSE EPRA Nareit Global REITs Index has gained 9.7 per cent in total returns in this year thus far.

With rates gradually decreasing, the REITs sector might experience some relief. According to Nareit, REITs will likely be subject to day-to-day share price volatility as the equity market digests and reassesses changing probabilities on the path for lower rates. Over the medium to long-term period, the two impacts of lower rates on REITs are lower financing costs which would lead to higher earnings growth, and improved cost of debt and capital which would support acquisition activities. The interest rate hikes since 2022 have led to increased borrowing costs, lower distributions to unitholders, and lower property valuations.

CapitaLand Integrated Commercial Trust (CICT) recently announced an acquisition of a 50 per cent stake in ION Orchard mall. The $1.85 billion deal will increase CICT's Singapore retail footprint by approximately 14.3 per cent in terms of net lettable area and is expected to provide a pro forma DPU accretion of 1.2 per cent and 0.9 per cent for FY2023 and 1H2024 respectively. Leverage ratio is expected to remain stable from 39.8 per cent to 39.9 per cent.

S-REITs' secondary market activity momentum has started to pick up, recording up to 10 acquisitions in the first half of 2024. Additionally, CICT's private placement achieved a subscription rate of about 3.7 times covered, potentially indicating a recovery in the secondary market and paving the way for the primary markets.

For more research and information on Singapore's REIT sector, visit sgx.com/research-education/sectors for the monthly SREITs & Property Trusts Chartbook.

REIT Watch is a regular column on The Business Times, read the original version.

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