On the evening of Aug 23, Fed chair Jerome Powell said that the “time has come” for the Federal Reserve to “adjust” its policies. “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks,” he added in his speech at Jackson Hole, Wyoming, where the Kansas City Fed’s annual conference was held.
The OCBC Investment Research (OIR) team believes that the Singapore REIT (S-REIT) sector is at a “long-awaited turning point”. The sector, which has been “bludgeoned” by the Covid-19 pandemic, sticky inflation and elevated interest rates, has been underperforming the benchmark Straits Times Index (STI) and the MSCI Singapore Index since 2020 to date.
“Notwithstanding limited historical data for S-REITs, the sector’s share price performance is dependent, in our view, on the driver and rationale behind rate cuts by the Federal Reserve (Fed),” the team writes in its Aug 23 report. “Easing inflation trends and a softening US labour market are setting the stage for the Fed to start cutting rates by 25 basis points (bps) each in September and December.”
