SINGAPORE (March 16): Since the start of the year, the FTSE Straits Times REIT Index is down 20% compared with the Straits Times Index which has lost 22%. Interestingly, the FTSE EPRA NAREIT Developed Index is down 23%. No surprise then that recent entrants into the FTSE EPRA NAREIT Developed Index played catch up today. For instance Frasers Centrepoint Trust lost 9.77% today, Keppel DC REIT 11%, Mapletree Logistics Trust fell 16.18%, Mapletree Commercial Trust fell 12%, Frasers Logistics and Industrial Trust lost 11.9% and Manulife US REIT was down 15.7%.
The sell-down in the FTSE ST REIT Index comes on the back of the US Federal Reserve slashing the US Fed Funds Rate to zero, and the unleashing of quantitative easing which has spooked investors. QE comprises two parts, buying US Treasury securities by at least US$500 billion and buying agency mortgage-backed securities by at least US$200 billion. There appear to be problems in the latter with reports that mortgage rates in the US have actually risen because of a lack of demand for securitised mortgages. And the Fed has stepped in to provide liquidity.
Furthermore, CNBC reported on March 13 that Carl Icahn is shorting US commercial real estate, in particular, its commercial mortgage bond market.
Hence, the reason why S-REITs have fallen sharply is the realisation that 1) the US credit market needs liquidity; 2) local private bank high net worth money could be unwinding; and 3) fund redemption especially for members of the FTSE EPRA NAREIT Developed Index ETF.
Of course all the REITs have fallen because of point 1) and 2). In addition though, the much desired entry into the FTSE EPRA NAREIT Developed Index is a double-edged sword and FCT, FLT, Keppel DC REIT and MUST are recent entrants.
