No Rate Hike, What’s Next for Singapore Reits

singapore reits

Amid all the speculations and forecast, Federal Open Market Committee decided to leave the rates steady at 0%, no hike. Friday morning when market opened, most Singapore Reits appear well supported. However, a few counters have gave up the earlier gains at the close.

While the Fed has kept rates at 0, it has created further uncertainties. Questions remain on most investors’ mind. Will it be next month, next December or next year. One of the reasons given is the uncertainties in global economies. Amid the inaction by the Fed, this could prompt further stimulus by other economies including Japan, Europe and China.

Yes, the market go through Bull and Bear cycles. As Value Investors, we understand that this is normal. As a Value Investor or sensible businessman, we should not let Mr Market influence our views on our investments. When markets open again each day, Mr. Market will come to us again either being very moody or very happy.

Most Singapore Reits manager has been actively refinancing their debt. Probably close to 70% are in fixed rate which would not be affected by the near term rates fluctuations. Distributions Per Unit for next few quarters should remain reasonably consistent. Valuations to get more attractive if there is further volatility. The chances of Fed raising rates in a fast pace remain slim. S-Reits still provide reasonable Yields compared to other investment instruments.

During the most recent VIC Stocks Dating, noticed most investors in Singapore are looking for dividends play for Singapore based stocks. While valuations are getting more attractive, we might want to zoom in to the sub sectors :

  1. Office : A few big upcoming projects including Tanjong Pagar Centre, Marina One and Duo will add significant supply from now till 2017. This could put some pressure on office rentals.
  2. Industrial & Logistics : The big brother A-Reit entered into an agreement to acquire properties valued at A$1.013 billion in Australia. At home in Singapore, there seems to be sufficient supply with occupancy in the 80+% range.
  3. Retail : With a slower growth in tourist arrivals, shopper traffic in prime areas unlikely to see strong uptrend. Heartland malls could be more resilient in a slow growth environment.

Will add into some of my positions if it meet the following criterias :

  1. Gearing < 40%
  2. P/BV < 0.8
  3. Selective sectors
  4. Strong Sponsor
  5. Yield > 8%

Leong Tan

Value Investing College