Brokers' take

Singapore Reits

DBS Group Research, Oct 7

The weakness in jobs data from the US prompted DBS economists to revise our forecast for the Fed to postpone their rate lift-off to Q1 2016 from December 2015 and subsequent hikes to be more modest (two more in 2016 versus four previously). 10-year US Treasuries and 10-year Singapore bonds have retreated by 30-40 basis points from year highs. We believe this to be a positive boost for Singapore real estate investment trusts (Reits) in the shorter term and big caps like CapitaLand Mall Trust, CapitaLand Commercial Trust, Mapletree Industrial Trust, Mapletree Commercial Trust, Keppel Reit and Suntec Reit should benefit. Singapore Reits currently offer an average 2016 forecast yield of 7 per cent and with yield spreads of 4.7 per cent at close to its -1 standard deviation range, we see a comfortable buffer for investors to add at current levels.