Friday 15 March 2024

Are Singapore REITs a Buy Now?- With Fed Potential Pivot

Contributed By: The Big Fat Whale

Many investment bloggers have touched on this topic given that the Singapore REITs have fallen by almost 30% from their mid-2021 peak. Is it a buy now?  Given the recent Fed guidance of a potential pivot to lower interest rates.

Frankly, the Fed has been flip-flopping but the all-important inflation numbers are at an almost ideal level of around 3%. It is still short of the 2% target but things seem to be under control.

REITs have been the bellwether for lots of retail investors given the perception of it being a safer instrument than true blue stocks. The attraction is that mandatorily, they have to pay out 90% of their income to shareholders as dividends.

Moreover, given that they are tangibly backed by shopping malls and industrial and commercial buildings, it added the assurance that their investment is not riding on some fads and whatnot.


SREITs Current Climate

They were doing well during the low interest rate environment which lasted since 2008 (Great Financial Crisis) and were stable in price fluctuations. The recent price drop would not be something that investors are used to. It is back to their Covid 19 lows or for some REITs, they set record lows.

With the Covid situation, it is understandable why REIT prices plunged as everyone is in locked-down mode, which will affect the rental situation in shopping malls and office buildings.

S-Reits Price Chart

Source: Yahoo Finance

This time around, it is due to the rapid escalation of interest rates. In April 2022, the Fed rate was still hovering close to zero per cent and is now at the 5.5% rate. With the potential pivot hinted at by the Federal Reserve in  November 2023, it saw a renewed interest in REITs- the REITs index appreciated 15%. Prices have since retraced close to their all-time low due to the market perception of the credibility of the pivot.

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