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Despite the expected rate hike in June, UOB Kayhian believes that Singapore REITS may transition from being a yield catalyst into a growth vehicle role, reported Singapore Business Review.
“S-REITs are about to transition from being viewed as yield vehicles to growth vehicles, especially in light of encouraging US and Singapore economic data, with Fed fund futures implying a 100 percent likelihood of a hike next month,” said the brokerage firm.
UOB Kayhian noted that a yield compression to the upcycle average spread of 2.8 percent implies over 23 percent upside potential for REITS.
“We prefer deep-value and diversified REITs like CCT and FLT, and those with significant business park exposure, namely AREIT.”
The firm reckons that AREIT’s business/science park and hi-tech portfolio, which accounts for 48 percent of its overall portfolio value, “will position it defensively against the slowdown in Singapore from the unprecedented simultaneous supply glut across other industrial segments”.
This article was edited by Denise Djong.
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