- The S-REITs Index declined 4% in August, reversing the 3% gain in July. NTT DC REIT (NTTDCR SP, non-rated) was the best performer, rising 3.8% (-6.4% YTD), following a positive 1Q26/27 business update, with DI 10.6% above its IPO projection. Daiwa House Logistics Trust (DHLT SP, non-rated) was the worst performer, declining 17.5% (-29.2% YTD), amid concerns over JPY weakness against SGD and vacancy risk. The overseas retail REIT sub-sector was the best-performing sub-sector, declining 0.8%, while overseas commercial REITs were the weakest, declining 6.2%.
- The Fed turned more hawkish, delivering a 25bps hike to 3.75–4.00%, with the Dot Plot indicating another hike in 2026. For S-REITs, higher-for-longer rates could weigh on valuations by putting upward pressure on dividend yields and keeping refinancing costs elevated, although the impact should be cushioned by fixed-rate debt and hedges. Importantly, with 3M-SORA already having fallen significantly to c. 1.2% (from 3.7% in 2023), the direct impact on borrowing costs may be more limited for S-REITs with SGD-denominated debt, well-laddered maturities, and high fixed-rate/hedged debt exposure (c.75% on average).
- We maintain our OVERWEIGHT recommendation on S-REITs, focusing on names that can deliver DPU growth despite elevated interest rates. We favour REITs with robust balance sheets, defensive earnings profiles, and a high proportion of fixed-rate debt, which should provide greater resilience against rising rates and interest rate volatility. Sector operating fundamentals remain stable, and we continue to favour retail S-REITs, supported by healthy tenant sales, near-full occupancy and limited new supply, which should underpin mid- to high-single-digit rental reversions in FY26e. Our top picks are high-yielding REITs with resilient portfolios: Stoneweg Europe Stapled Trust (SERT SP, BUY, TP: €1.89), Elite UK REIT (ELITE SP, BUY, TP: £0.41), and United Hampshire US REIT (UHU SP, BUY, TP: US$0.69).
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