S-REITs Bi-Weekly Updates (16-31 Aug 22)
S-REITs declined 4.3% as the Fed maintained a hawkish stance during the Jackson Hole Economic Symposium. Outlook is also clouded by a protracted Russia-Ukraine War. S-REITs are resilient due to their stable cash flows. Investors are likely to turn their attention to S-REITs when economic growth and inflation start to moderate. Our bottom-up and diversified BUY picks are FCT (Target: S$2.74), LREIT (Target: S$0.99), MINT (Target: S$3.36) and MLT (Target: S$2.08). Maintain OVERWEIGHT.
WHAT HAPPENED IN THE LAST TWO WEEKS
• Wearing of masks is no longer required indoors starting 29 Aug 22. Wearing of masks is only mandatory in two settings: a) ambulances, hospitals, polyclinics and residential care homes, and b) public transport, such as MRT, LRT, buses and boarding areas. The requirement for food handlers to wear masks, including staff preparing and selling food and drinks at cafes, restaurants, supermarkets and hawker centres, continues to apply. This is another step towards living with COVID-19 as an endemic.
• Many Singaporeans continue to wear masks indoors despite the easing of restrictions. They do not want to catch COVID-19 nor pass the infection on to their loved ones. Some Singaporeans are enjoying their newfound freedom of not having to wear masks, while others feel awkward and continue to habitually wear their masks.
• FSTREI corrected 4.3% in the past two weeks, underperforming the STI that lost 1.1%. Traders anticipating a dovish pivot were rudely awakened as Fed chairman Jerome Powell maintained discipline in fighting inflation during the Jackson Hole Economic Symposium on 25 Aug 22. Yield for 10-year Singapore government bonds spiked 31bp to 2.98% but remains below the peak of 3.24% set in mid-June.
• Top outperformer: There were hardly any gainers. UHU was unchanged with downside protected by its long WALE of eight years and attractive 2022 distribution yield of 9.9%.
• Top underperformer: DCREIT lost 14.7% as its planned acquisition of data centres has not materialised. US REITs MUST and PRIME lost 11.1% and 6.0% respectively. Industrial REITs MLT, FLT, MINT and AREIT declined 7.2%, 6.2%, 5.9% and 5.4%.