• Despite the recent broad market downturn, S-REITs rebounded strongly with the STI REITs rebounding 5.2% over the past five sessions, on S$50 million net institutional inflow. Notably, CapitaLand Integrated Commercial Trust and Frasers Centrepoint Trust recorded the most significant net inflow.
   
• For the first half of March, the outlook for US Fed Fund Rates shifted back to dovish levels last observed at the end of October, with the majority anticipating an additional 75bps of cuts before 2026. This was on the back of weak prints for the Conference Board and University of Michigan consumer gauges.
   
• Over the past month, larger-cap S-REITs have generally outperformed smaller-cap counterparts, with the 10 largest by market cap averaging 4.8% total returns compared to a 3.3% decline for the rest of the S-REIT sector, with the larger caps possibly supported by institutional inflows captured by various index weightings.
   

Recent Tariff, Growth & Inflation ConcernsSince 19 February, the Trump Administration has released the America First Investment Policy Memorandum, marked imports of multiple resources as national security threats, and implemented tariffs on Canada, Mexico, and China. These countries, along with others, have announced retaliatory tariffs. Last week was particularly impactful, with USTR Jamieson Greer defending the tariffs as essential for US reindustrialisation and global stability. Meanwhile, Commerce Secretary Howard Lutnick and Treasury Secretary Scott Bessent have both reiterated that the tariffs are necessary for the long-term durability of the US economy. 

The impact of trade tensions on global markets was evident in the performance of global banks last week. The trio of DBS Group Holdings (DBS), Oversea-Chinese Banking Corporation (OCBC), and United Overseas Bank (UOB) averaged declines of 4.2%. This represented the brunt of the average 4.9% decline from 19 February to 17 March for the STI trio of Banks. 

All Data as of 17 March 2025, Source: SGX, Refinitiv, Morningstar & Bloomberg. Note ADT refers to Average Daily Trading Turnover; NIF refers to Net Institutional Flow and TR refers to Total Return.Similarly, international bank leaders in trade finance, such as JP Morgan, HSBC, Citi, BNP Paribas, and Standard Chartered, experienced an average decline of 4.3% over the Asia trading week. 

At the same time, the US growth outlook has weakened, with the Conference Board consumer gauge falling to an 8-month low and the University of Michigan consumer gauge dropping to a 27-month low. This reduced confidence is less about tariffs and more about the recognition that broader strategic policies will entail short-term pain as the US economy is redirected towards a sustainable path to reduce its fiscal and trade deficits. The familiar overarching theme of inflation also remains a persistent concern and is yet to reach the desired 2.0% threshold in the US. The 19 January FOMC minutes revealed concerns over the impact of President Trump's tariffs on potential inflation, with markets focused on the summary economic projections due at the FOMC later this week. The current consensus is for 50bps to 75bps of cuts before 2026. The OECD Economic Outlook, Interim Report for March 2025 has also downwardly revised its 2025 US GDP growth estimate from 2.4% to 2.2%, which represents a deceleration from 2.8% in 2024. S-REITs Surged as Banks DeclinedAs global markets anticipated an additional 75bps cut to the Fed Funds Rate in 2025 for the second consecutive week ending 14 March, S-REITs extended their tentative rebound. Over the past five sessions, the seven REITs of the STI averaged 5.2% gains on S$50 million of net institutional inflow, representing 0.1% of their combined market capitalisation. 

All Data as of 17 March 2025, Source: SGX, Refinitiv, Morningstar & Bloomberg. Note ADT refers to Average Daily Trading Turnover; NIF refers to Net Institutional Flow and TR refers to Total Return.Notably, two of the seven STI REITs—CapitaLand Integrated Commercial Trust (CICT) and Frasers Centrepoint Trust (FCT)—recorded the majority of the net institutional inflow, with CICT booking 0.3% of net institutional inflow relative to its market capitalisation and FCT booking 0.4%. 

CICT saw its FY24 (ended 31 Dec) AUM grow 6% in 2024, with NPI up 3.4% and rental reversion up 8.8% for retail and 11.1% for office. Incidentally, after eight years at the helm of CICT, CEO Tony Tan will move on to take on the role of Chief Corporate Officer at CapitaLand Development. He will be succeeded by CICT Deputy CEO Tan Choon Siang on 1 May. For FCT, excluding the impact due to divestment of Changi City Point and the AEI at Tampines 1, NPI was also up 3.4% in FY24 (ended 30 Sep), with 7.7% overall rental reversion, and AUM up 11%.  

In contrast, the three STI banks experienced an average decline of 3.4% over the five sessions to 17 March, with S$490 million of net institutional outflow, amounting to 0.2% of their combined market capitalisation. As noted above the potential spiraling of trade tensions increasingly weighed banks since 19 February. Since 19 February, the S&P 500 Banks Index has also booked more declines than the S&P 500 Technology Index.

While DBS noted in its 4Q24 media briefing trade loans declined S$1 billion to S$45 billion in 4Q24, management was upbeat on regional trade outlook. The incoming DBS CEO Tan Su Shan highlighted the significant upside potential from enhanced intra-regional trade, particularly with the RCEP. Ms Tan added that DBS will concentrate on trade opportunities between ASEAN, North Asia, and Europe, and Western MNCs from Europe and Asian MNCs are likely to increase their activities within Asia due to tariffs, and the Bank will target areas with the highest growth potential.Larger Cap S-REITs Led Recent Sector Gains Since 19 February, the 39 REITs and property trusts of the S-REIT Sector listed for trading have averaged a 1.2% decline in total return. There has appeared to be some fragmentation of S-REIT the performances with the larger capitalised S-REITs generally outpacing the smaller capitalised over the period. 

Similar instances have been observed in recent years and attributed to the larger capitalised trusts being positioned to capture more institutional and passive flows through various index weightings, or the scale of the portfolio and/or the geographical focus. As many as eight of the 10 largest trusts of the S-REIT sector by market capitalisation have ranked among the 13 strongest performing S-REITs from 19 February through to 17 March. 

This has seen the 10 largest S-REITs by market capitalisation average 4.8% total returns since 19 February. More recently these 10 S-REITs also averaged 4.6% total returns for the five sessions through to the 17 February close with S$58.0 million of net institutional inflow. 

At the same time, the remainder of the S-REIT Sector has averaged a 3.3% decline since 19 February, and an average 1.1% gain over the past five sessions with a much lesser net institutional inflow of S$2.7 million over those five sessions. Of note, the S-REITs with market capitalisation of less than S$1 billion, which are mostly investing in international property assets have seen average declines of 7.5% since 19 February, and average declines of 1.9% for the past five sessions.

This includes Digital Core REIT with a market capitalisation of S$967 million. However, of note, Franklin Resources, Inc, one of the world’s largest investment managers, also known as Franklin Templeton, emerged as a substantial shareholder of Digital Core REIT last week. Filed on 10 March, an acquisition on 6 March, took Franklin Resources’ deemed interest above the 5.0% threshold to 5.06%. The fund noted that the unit acquisition was by funds or client accounts that are managed by investment advisers directly or indirectly owned by Franklin Resources, Inc. Back on 12 February, Digital Core REIT declared a distribution per unit of US$0.036 per unit for FY24. For the year, the pure-play data centre REIT also signed new and renewal leases worth US$74 million in annualised rental revenue. This extended the Weighted Average Lease Expiry by two years and sees the REIT maintain its 97 per cent occupancy. Over US$250 million in investments were also completed, expanding the Group's footprint in Europe and Asia. On the capital management side, 27.0 million units were also repurchased at an average price of $0.576, delivering 1.8% DPU accretion. Additionally, the balance sheet was strengthened with US$280 million from asset sales and equity fundraising, extending debt maturity from 2.8 to 4.7 years. This also maintained its 34.0% leverage ratio, with US$540 million debt headroom.

The 10 largest S-REITs by market capitalisation also maintain a median price-to-book ratio of 0.93x, versus 0.64x for the reminder of the S-REITs, however do not on average maintain a higher distribution yield. 

The full S-REIT performances are tabled below. 

All Data as of 17 March 2025, Source: SGX, Refinitiv, Morningstar & Bloomberg. Note ADT refers to Average Daily Trading Turnover; NIF refers to Net Institutional Flow and TR refers to Total Return.Enjoying this read?

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