Opportunity for SREITs at Low Prices Before Rate Cuts 【CSOP Fixed Income Weekly】
Weekly Performance Checkpoint
【SRT】
– $CSOP S-REITs INDEX ETF (SRT.SG)$ ’s gains last week were due to industrial, data center and retail by subsectors and KDCREIT, CLAR, and MINT by individual REITs. The 3 REITs gained after Macquarie resumed their coverage with an outperform rating.
【MMF】
– Markets are pricing in fewer rate cuts since November’s FOMC meeting. Bloomberg Economics predicts a rate cut by the Fed in either December 2024 or January 2025, but not both. We expect $CSOP USD Money Market Fund (SGXZ96797238.MF)$ to continue to deliver stable yield in the near term. As of 20241129, the fund has net yield at 4.59%. ^
Source: CSOP and Bloomberg as of 20241129. ^ 7-day net yield is calculated based on calendar days and NAVs in 5-decimal.
【CN】
– Last week, CGB price rose slightly in both CNY and in USD terms. 1Y MLF rate was held steady for a second month at 2%. $ICBC CSOP CGB ETF S$ (CYC.SG)$ $ICBC CSOP CGB ETF US$D (CYB.SG)$
– CNY is anticipated to weaken further following tariffs, with USD/CNY rising to 7.40 in 3 months, before flattening towards 7.50 in 6 to 12 months.
– While Chinese Yuan is anticipated to weaken following US tariffs, it will be manageable (reasons in the next slide) and its complex product mix that is less substitutable and diverse supply chains could help it stay resilient against US tariffs.
– PBOC remains dovish and interest rates are forecasted to fall in 2025 which should support Chinese Government Bonds (CGB).
Source: CSOP, Bloomberg as of 20241129
Global Market Outlook
【CN】Central Bank May Further Reduce the Deposit Reserve Ratio By 0.25-0.5% This Year.
– According to the latest survey by Bloomberg News, China's economy is expected to grow by 4.9% in Q4, slightly higher than previously estimated.
– Chinese corporate foreign debt has fallen to a multi-year low, potentially providing more ease in dealing with exchange rate risks after Trump's return.
– Sheng Songcheng, former head of the Survey and Statistics Department of the PBOC, predicts that the central bank may further reduce the deposit reserve ratio by 0.25-0.5% this year, and there is still about 40bps of room for interest rate cuts in the future.
【SG】Opportunity For Sreits At Low Prices Before Rate Cuts
– Macquarie suggests that investors have an opportunity to buy SREITs at low prices similar to before rate cuts, especially those in industrial and suburban retail sectors with stable balance sheets that can withstand prolonged high interest rates. They also resumed coverage of several S-REITs, including CLAR, MPACT, MLT, MINT, FLT, KDCREIT, KREIT, FCT, and CLAS, recommending an outperform rating.
【US】Fed Officials Advocating for a Cautious Approach To Rate Cuts
– Last week, Scott Bessent, who supports tariff and tax cuts but prioritizes economic stability, was appointed as Treasury Secretary by Trump.
$Mapletree Ind Tr (ME8U.SG)$ $Keppel DC Reit (AJBU.SG)$ $FRASERS CENTREPOINT TRUST (J69U.SG)$ $CapLand IntCom T (C38U.SG)$ $CapLand Ascendas REIT (A17U.SG)$ $CapLand Ascott Trust (HMN.SG)$ $ParkwayLife Reit (C2PU.SG)$ $Keppel DC Reit (AJBU.SG)$ $NikkoAM-STC Asia ex Japan REIT ETF (CFA.SG)$ $LION-PHILLIP S-REIT (CLR.SG)$ $Phillip-China Universal MSCI China A 50 Connect ETF (MCN.SG)$ $UOBAM PINGAN CHINEXT S$ (CXS.SG)$ $Lion-OCBC Sec HSTECH S$ (HST.SG)$
Disclaimer
The investment product(s), as mentioned in this document, is/are registered under section 286 of the Securities and Futures Act (Cap. 289) of Singapore (the “SFA”). This material and the information contained in this material shall not be regarded as an offer or solicitation of business in any jurisdiction to any person to whom it is unlawful to offer or solicit business in such jurisdictions. This document is not to be construed as recommendations to buy/sell any above-mentioned securities, or any securities in the above-mentioned sectors or jurisdictions.
CSOP Asset Management Pte. Ltd. (“CSOP”) which prepared this document believes that information in this document is based upon sources that are believed to be accurate, complete, and reliable. However, CSOP does not warrant the accuracy and completeness of the information and shall not be liable to the recipient or controlling shareholders of the recipient resulting from its use. CSOP is under no obligation to keep the information up to date. The provision of this document shall not be deemed as constituting any offer, acceptance, or promise of any further contract or amendment to any contract. The information herein shall not be disclosed, used, or disseminated, in whole or part, and shall not be reproduced, copied, or made available to others without the written consent of CSOP.
Advice should be sought from a financial adviser regarding the suitability of the investment and/or investment product before making an investment. Investment involves risk. The value of investments, and the income from them, can go down as well as up and an investor may get back less than the amount invested. Past performance is not necessarily indicative of future performance. Investor should read the prospectus and product highlights sheet, which can be obtained on CSOP website or authorized participating dealers, before deciding whether to invest. This document has not been reviewed by the Monetary Authority of Singapore.
Index Provider Disclaimer
The CSOP iEdge S-REIT Leaders Index ETF is not in any way sponsored, endorsed, sold or promoted by Singapore Exchange Limited and/or its affiliates (collectively, “SGX”) and SGX makes no warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the iEdge S-REIT Leaders Index and/or the figure at which the iEdge S-REIT Leaders Index stand at any particular time on any particular day or otherwise. The iEdge S-REIT Leaders Index are administered, calculated, and published by SGX. SGX shall not be liable (whether in negligence or otherwise) to any person for any error in the CSOP iEdge S-REIT Leaders Index ETF and the iEdge S-REIT Leaders Index and shall not be under any obligation to advise any person of any error therein. “SGX” is a trademark of SGX and is used by CSOP under license. All intellectual property rights in the iEdge S-REIT Leaders Index vest in SGX.
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