Investors Turn to S-REITs: A Closer Look at August's Performance
S-Reits saw a net institutional inflow exceeding S$90 million in August, marking the second consecutive month of positive net inflows following July's S$15 million. In contrast, the first half of the year primarily experienced net outflows.
The iEdge S-REIT Index recorded positive returns for the second month, rising by 5.83% in August, following a 6.19% increase in July. This brings the total gain for the initial two months of the second half of 2024 to 12.02%, reversing the -13.18% decline in the year's first half.
Driven by the potential Fed rate cuts, the fundamentals of S-REITs also suggest an optimistic outlook.
1. The real estate sector is highly sensitive to interest rates, with bank borrowing playing a critical role in the capital management of real estate investment trusts (REITs). The anticipated interest rate cuts could lower borrowing costs for REITs, particularly those with a higher proportion of floating-rate debt or refinancing needs. Furthermore, rising real estate valuations may enhance the net asset values of these trusts, encouraging increased investment flows.
2. High-dividend REITs attract investor interest in an environment characterized by expectations of lower interest rates and market volatility. Adopting a high-dividend strategy can provide investors with a relatively stable income stream and a degree of protection against market fluctuations. Generally, regulations require REITs to distribute at least 90% of their net profits to unitholders while maintaining a leverage ratio (also known as debt-to-equity ratio) below 50%.
3. With improving economic activity and tourism in the region, sectors such as local retail and hotel REITs are likely to see significant benefits, further contributing to a broader index recovery, especially with events like the upcoming F1 race in Singapore.
In addition to S-REITs, REIT tracking ETFs also merit investors' attention.
While ETFs have been trading on the SGX for a long time, REIT tracking ETFs actually made their debut in 2016. Currently, 5 REIT tracking ETFs are traded on the SGX. Dan Chang, a Trading Representative at Phillip Securities, highlighted several advantages of investing in S-REIT ETFs:
1. High price transparency: S-REIT ETFs trade like stocks on the Singapore Exchange, allowing investors to see the exact prices at which they buy or sell.
2. Investors can purchase a basket of S-REITs through a single investment instrument, which is particularly beneficial for beginners and busy investors.
3. Cost efficiency: S-REIT ETFs are index-tracking funds, predominantly passively managed, resulting in generally lower expense ratios.
The following charts outline the top 10 trusts in the iEdge S-REIT Index with the highest percentage change in August and the five REIT ETFs currently trading on the SGX.
Previously, DBS Bank also reported on which REITs and sub-sectors are poised to benefit the most amid calls for interest rate cuts.
Mooers, do you believe the Singapore real estate market will continue to recover? Please share your thoughts.
Source: SGX, moomoo, Bloomberg
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
Read more
Comment
Sign in to post a comment
102865529 : Revival time
Alice Lim choo : good
103916021 : k
101775147 AL alfi J : Riplai, come in.