At OCBC Credit Research, we track 21 S-REITs which are Singapore-dollar credit issuers. These S-REITs represent around 75% of the total S-REIT market cap. While we have turned more cautious over the credit profile of the S-REITs we track over the next 12 months, the credit deterioration is starting from a manageable base. We consider the bulk of these 21 S-REITs to be high-grade or more “crossover”.
With the rise in interest rates through 2022 likely to continue into the first half of 2023, albeit at a slower pace, we discuss how Singapore-listed REITs or S-REITs, as a key Singapore-dollar credit-issuing sector, are contending with this new normal.
While the market is still pricing in a rate cut in mid-2023, the US Federal Reserve (Fed) terminal rate range is between 5% and 5.25%, indicating the tussle between what the market thinks and what the Fed thinks is still an ongoing issue.
