The REITs have been negatively impacted by the Federal Reserve’s unprecedented accelerated hike in its Federal Funds Rate (FFR) since end-2021 when rates were near zero. This rapid rise in FFR from near zero to a high of 5.25% to 5.5% within 24 months affected REITs in three main ways. The trading prices of the REITs were the first to react by declining. This is because the distribution per unit (DPU) yield and risk-free rates trade at a relatively stable spread. Rising risk-free rates, which are the initial and main transmission in the markets of higher interest rates, caused prices to fall to compensate for higher DPU yields.
During 2024, the runaway US equity market sucked up liquidity from the rest of the world. The only stocks on the Singapore Exchange (SGX:S68
) that attracted serious investors' attention, and which imanaged to keep up with the likes of the Nasdaq Composite Index (Nasdaq) and the S&P 500 Index were the local banks. Since the start of the year, the REITs, as represented by the FTSE ST REIT Index, are down 8.2% in the same period.
At the end of the year, The Edge Singapore usually takes a light-hearted look at S-REITs in a table titled “REITs: Bankers’ Best Friends”. This year, REITs are unlikely to be bankers’ best friends. Between them, the REITs raised $3 billion, of which CapitaLand Integrated Commercial Trust (SGX:C38U) (CICT) and Keppel DC REIT (KDC REIT) raised more than $2 billion. ESR-REIT, Frasers Centrepoint Trust (SGX:J69U) (FCT) and ParkwayLife REIT also raised equity.
