Singapore REITs fall as US inflation figures weigh on potential payouts

Written by Amanda Lee

Units in Singapore-listed real estate investment trusts fell on Wednesday as the latest US inflation figures fueled concerns that the continued high interest rate environment could impact distributions to unitholders.

Among Singapore REITs, Frasers Logistics and Commercial Trust fell the most by 1.8%. CapitaLand Ascendas REIT fell 1.8% and CapitaLand China Trust fell 1.3%. Trusts with exposure to U.S. or European assets fell the most, with Prime US REIT down 6.8% and IREIT Global down 1.3%.
Better-than-expected US inflation data makes it “essentially less likely” that the Federal Reserve will cut interest rates in the first half of this year, with interest costs, particularly from variable-rate loans, expected to remain high during this period It suggests that.  RHB Research analyst Vijay Natarajan said this could impact distribution.
Data on Tuesday showed U.S. consumer prices rose 3.1% in January from a year earlier, compared to a Wall Street Journal poll that predicted a 2.9% rise. Core prices excluding food and energy rose 3.9%.
IG market strategist Yep Jun Long said the data suggests it may take longer for U.S. inflation to moderate toward the Fed’s 2% inflation target.
“While this may not be welcome for rate-sensitive REITs in general, given the sector’s debt exposure, we may still see some resilience for REITs with lower exposure to floating rate debt. “If there is a decline, it could be an opportunity for a fall” – buy,” Yep said.
Meanwhile, Maybank analyst Krishna Guha said REITs with overseas exposure are facing challenges such as the impact of falling valuations and a tough funding environment.
“This weighs heavily on asset values ​​and distribution,” Guha said.
Email Amanda Lee at amanda.lee@wsj.com.