S-Reits an ‘oasis of calm’ amid global bond yield surge: UOBKH
Deteriorating fiscal sustainability in major economies is keeping foreign bond yields structurally higher
UOB Kay Hian (UOBKH) has maintained an "overweight" outlook on Singapore real estate investment trusts (S-Reits), viewing them as "oasis of calm" amid rising global bond yields that are negatively impacting overseas-exposed assets. The brokerage updated its dividend discount model for S-Reits by adjusting the risk-free rate based on country-specific 10-year government bond yields.
Singapore's 10-year yield rose by 24 basis points to 2.36% year-to-date, compared to larger increases of 63 basis points to 4.8% for US bonds and 82 basis points to 2.88% for Japanese bonds. UOBKH attributed Singapore's more resilient yields to its reputation for fiscal austerity and conservatism. The brokerage's target prices for CapitaLand Integrated Commercial Trust, Frasers Centrepoint Trust, and Lendlease Global Commercial Reit remain nearly unchanged at S$3.06, S$2.93, and S$0.79, respectively, due to their heavy Singapore exposures.
However, prices for CapitaLand Ascott Trust and CapitaLand Logistics Trust were cut by 27.5% and 10.9% due to significant exposure to Australia, the UK, and the US. UOBKH noted persistently high global bond yields driven by the US's budget deficits, Japan's rising debt burden, and Australia and the UK's elevated yields. S-Reits with substantial Singapore, China, and Japan holdings are expected to be less adversely affected by the yield surge.
Written by urgent.news from The Business Times - Companies & Markets's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
