Singapore's FTSE Straits Times Index closed 0.2% higher at 3833.07, led by REITs and consumer stocks.

As recession risks rise to 40%, Fed could have at least 2 rate cuts, benefitting S-REITs borrowing costs while widening yield spreads could trigger a REIT rally.

Although S-REITs are an unlikely place to "hide" during a recession, JP Morgan reckons that a faster than expected 31% drop in 6-month Singapore benchmark rates and lower 1-month Sora down 100 basis points (bps) to 2.4% may see investors rotating to defensive yield plays.

Among advancers, Keppel DC Reit added 4.88%; CapLand China Trust Up 4.6%; YZJ Shipbldg up 3.88%; Mapletree Logistics Trust up 3.2%. Meanwhile, Singapore Airlines lost 1.6% and Seatrium dropped 1.4%.

Against this background, JP Morgan is expecting a 15% upside to the S-REITs' September 2024 highs.

"There is further potential for lower rates, as JPM and the Street are expecting two/three Fed rate cuts by end-2025, with our economists highlighting a 40% risk of a US recession this year. We estimate a 4% upside to S-REITs’ DPU for every 100 bps fall in floating rates, and anticipate that S-REITs will revise down borrowing cost guidance. Yield spreads of 340 bps, the highest level since March 2022 which triggered a rally then, is also supportive," JP Morgan says.

Its top picks are Singapore-focused names including CapitaLand Integrated Commercial Trust, CapitaLand Ascendas REIT, Keppel DC REIT, Frasers Centrepoint Trust and laggards such as Mapletree Logistics Trust.