INVESTMENT ACTION
We maintain our UNDERWEIGHT rating on the S-REITs sector. We expect yield spreads to stay close to or above the 7 year average as this period of normalising interest rates amidst an unfavourable demand/supply dynamics could be deemed one of the most challenging periods for S-REITs over the past 7 years.
How do we view this?
Figure 1: Market expectations for further rate hikes in 2017
Figure 2: S-REITs historical yield spread vs Singapore 10 year govt bond yield
We favour REITs with lower gearing, supported by favourable macro-economic conditions or those with favourable long leases. Our ACCUMULATE ratings remain for Croesus Retail Trust, Mapletree Industrial Trust and First REIT.
INVESTMENT ACTION
We maintain our UNDERWEIGHT rating on the S-REITs sector. Investors can refer to our February sector report for a more in depth outlook for each individual REIT sector and our thesis for underweighting the sector amidst this rate hike cycle.
Figure 3: REIT Universe and PSR Reit Ratings
Dehong covers primarily the REITs and property developer sector. He has close to 7 years experience in equities related dealing and research roles.
He graduated with a Masters of Science in Applied Finance from SMU and Bachelors of Accountancy from NTU.