Top Reads of The Week 17/2/2024

While interest rate cuts remain a possibility, the latest signals from the Federal Reserve indicate that reductions may not materialise as quickly as some investors anticipate.

This means the environment of rising rates could persist for longer than hoped.

Even stronger Singapore REITs face intensifying headwinds as higher interest rates make refinancing significantly more expensive.

REITs are leveraged vehicles, so their distributions and share prices are highly sensitive to financing costs.

The Fundsupermart article provides an excellent deep dive into the refinancing risks for REIT investors as rates stay elevated.

Their analysis is highly recommended for any REIT investor trying to navigate the current environment.

Top Reads of The Week  

Traders see rising chance Fed defers first rate cut beyond June 2024

https://www.reuters.com/markets/rates-bonds/traders-see-rising-chance-fed-defers-first-rate-cut-beyond-june-2024-02-16/

Traders see a rising probability the Fed will raise rates further and keep policy restrictive for longer before cutting as Fed officials have been emphasising the need to control inflation even as the economy shows signs of slowing.

Hot stock: Keppel Pacific Oak US Reit plunges nearly 40%, all-time low; shocking

https://www.businesstimes.com.sg/companies-markets/hot-stock-keppel-pacific-oak-us-reit-plunges-nearly-40-all-time-low-shock

In a shocking development, Keppel Pacific Oak US REIT's stock plunged by nearly 40% to an all-time low after the company announced a suspension of distributions that caught investors off-guard.

Real Estate Lenders Confront Falling US Commercial Property Prices

https://www.bloomberg.com/news/features/2024-02-14/real-estate-lenders-confront-falling-us-commercial-property-prices

Lenders are facing increasing risks in commercial real estate as property prices decline in major US markets. Prices for office buildings, hotels, and retail properties have fallen as rents drop and vacancies rise.

With higher interest rates, refinancing will be more difficult, potentially leading to defaults.

Be selective in S-Reits as rates stay higher for longer

https://secure.fundsupermart.com/fsmone/article/rcms282441/be-selective-in-s-reits-as-rates-stay-higher-for-longer

Higher interest rates tend to negatively impact REITs as they make financing more expensive. Not all REITs will be equally affected, so astute stock picking will be required to invest profitably in the sector.

CICT's lower DPU, higher gearing; pandemic may have some investors questioning its prospects

https://www.businesstimes.com.sg/opinion-features/cicts-lower-dpu-higher-gearing-pandemic-may-have-some-investors-questioning-its

CapitaLand Integrated Commercial Trust's lower distribution per unit and increased gearing during the pandemic may lead some investors to question its future prospects and appeal as an investment.

Its asset composition and leverage make CICT more vulnerable to the post-pandemic economic landscape, and investors may prefer REITs with more defensive attributes in the near term.

China’s New Year travel surge signals consumer spending pickup

https://www.bloomberg.com/news/articles/2024-02-16/china-s-new-year-travel-surge-signals-consumer-spending-pickup

The number of trips taken in China over the Lunar New Year holiday period rebounded close to pre-pandemic levels, signaling a recovery in consumer spending and confidence in the world's second-largest economy.

Spending has lagged but the holiday numbers suggest the economy's recovery remains on track.