Mid-Cap S-Reits continue to lead sector in H1 2021

THE first half of 2021 saw vaccination progress provide some support for the global economy, amid continued Covid-19 infections. Within S-Reits, the 40 actively traded S-Reits & property trusts listed in Singapore generated total returns of 8.9 per cent in H1 2021. While this is slightly lower than the Straits Times Index's (STI) 11.9 per cent total returns for the same period, there were 14 trusts which generated returns that beat the STI.

In fact, the 10 best-performing trusts in H1 2021 were led by mid-cap S-Reits which averaged 25.2 per cent total returns and are a mix across industrial, health care, hospitality, retail and office sub-segments.

Across the sector in H1 2021, almost all sub-segments generated positive returns with the exception of specialised Reits.

Keppel DC Reit, the only listed specialised Reit, was the sector's least strongest in the year-to-date with -10 per cent total return, which followed on from its 38 per cent total return in 2020. Progress towards social and economic normalisation has put less demands on cloud, digital and online services. Nonetheless, digitalisation remains a key theme as digital economies continue to grow.

On the other hand, healthcare and industrial sub-segments continued to shine in resilience with 22 and 16 per cent average total returns respectively. Office, retail, diversified and hospitality sub-segments have also started to see some recovery in the first six months of the year, generating total returns ranging from 4 to 12 per cent, as Singapore moves back to Phase 3 (Heightened Alert) of its reopening in June 2021.

Some key drivers for S-Reits in the second half of 2021 will continue to be the roll-out of vaccinations and the expectation of leisure travel by year end which could be a beneficiary for the hospitality and retail sub-segments.

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At a recent interview with The Straits Times, Health Minister Ong Ye Kung shared that the government could be looking at easing dining-in rules from July 12 and shares Singaporeans' aspirations for leisure travel to return by end of 2021.

One other recent development for the sector is the change to ground rules of the FTSE EPRA Nareit Index Series. The investable market cap threshold for the Developed Asia series has been reduced from 0.3 to 0.1 per cent. Based on the FTSE EPRA Nareit Developed Asia Index's May 2021 factsheet, the index market cap was at US$411 billion and a 0.1 per cent threshold would assume a free-float market cap criterion of around US$411 million versus US$1.2 billion previously. The next index review is in September 2021.

With the change, more mid-cap S-Reits could potentially qualify for the index, subject to fulfilling other index requirements. Several past entrants to the index series have cited more visibility to the international investment community and passive funds tracking the index. SGX RESEARCH

• For more research and information on Singapore's Reit sector, visit sgx.com/research-education/sectors for the monthly S-Reits & Property Trusts Chartbook.
• Source: SGX Research S-Reits & Property Trusts Chartbook.