Is it time to load up on S-Reits? Caution is warranted in higher-rate environment

AS THE forward price-to-book ratio of the FTSE ST REIT Index hit 0.84 times as at Jun 30, close to two standard deviations below its 10-year average, investors may see this as an opportune moment to enter the Singapore Reit (S-Reit) market.

However, we caution investors against hasty decisions and advise prudence before entering.

Stress testing: a higher cap rate

We do not expect any rate cuts by the Federal Reserve this year, which may suggest further downside risks for S-Reits. Our view arises from the resilient US economy and the uncertainties surrounding the Red Sea which could potentially drive up shipping and freight costs, and in turn, contribute to sustained inflationary pressures.