CIMB kept its "underweight" rating on the real estate investment trust (Reits) sector, citing higher volatility for the sector ahead.
"With an impending hike in interest rates in the US and the potential rebalancing of capital flows, three key risks could negatively impact the performance of the S-Reits: the rise in interest cost, resulting in lower distribution per unit; the rise in 10-year bond yield; and the expansion of cap rates (drop in value of assets)," it said in a report on Wednesday.
It added that since S-Reits are trading close to their historical yield spread, the ability to grow is "more imperative than before".
"Given their strong balance sheets and availability of funding, we believe S-Reits will rely on inorganic means for growth," CIMB said.
The brokerage cites its top picks as OUE Hospitality Trust, Frasers Centrepoint Trust, Starhill Global Reit and Mapletree Industrial Trust.