- Solid close to 2023 as S-REITs saw accelerated return of c.9.1% in Dec ’23, up 15% from end-Oct lows
- Near-term profit take inevitable given the strong rebound in prices; we see overall net allocation to S-REITs in 2024
- Year-end valuations to validate our thesis that S-REITs are financially sound
- Time to pick value over safety in allocation strategy; prefer Retail > Office > Hotels > Industrials
What’s New
A solid close to 2023. Investors continued to add to the sector in Dec ’23 as global yields continued retreating. The US 10-year and SG 10-year yields declined by 40 basis points and 28 basis points m-o-m to 3.87% and 2.69% respectively. In Dec ’23, Singapore REITs (FSTREI index) continued to build on Nov ’23’s momentum of a +6.7% return, delivering a further c.9.1% rebound in prices, outperforming the developers (FTREH index) and the Straits Times Index (“STI”) both of which rebounded by c.5.6% and c.5.4% respectively.
In Dec ’23, most subsectors have seen higher share prices and we note that Office (or commercial) S-REITs were relative outperformers – at +10.8% m-o-m, following our upgrade of the sector to “overweight” from “cautious” followed by the retail S-REITs (+c.6.9% m-o-m). Industrial S-REITs, despite our more cautious stance for 2024, did well overall at +7.0%. However, we noted that it was largely pulled up buy the mid-cap industrial S-REITs (+7.4%) and data-centre S-REITs (+7.0%). Overseas-focused S-REITs saw an overall rebound of 11.3% (EU-focused) and a steep +65% m-o-m share price run in the US office S-REITs. Nevertheless, we are not chasers due to a low base effect.
