December 1, 2017

In what could be Janet Yellen’s last public appearance before Congress as the Federal Reserve Chairperson, she highlighted the Committee’s opinion that the U.S. economy will continue its expansion and there could be increased traction in wage growth as the labour market strengthens further. She also downplayed concerns over the relatively high asset valuations, pointing out that “overall vulnerabilities in the financial sector appear moderate”.

As such, the fed funds rate will likely continue to be raised gradually. Notwithstanding the likelihood of a higher interest rate environment ahead, the S-REITs have sought to mitigate their interest rate risks by hedging ~74% of their borrowings, based on the REITs under our coverage.

In our strategy report published yesterday, we highlighted Frasers Centrepoint Trust [BUY; FV: S$2.40], Frasers Logistics & Industrial Trust [BUY; FV: S$1.25], Mapletree Greater China Commercial Trust [BUY; FV: S$1.28] and Mapletree Logistics Trust [BUY; FV: S$1.35] as our preferred sector picks for 2018.

We are NEUTRAL on the broader S-REITs sector by OCBC Investment Research.

 

Frasers Centrepoint closed at S$2.040

Frasers Logistics & Industrial Trust closed at S$1.100

Mapletree Greater China Commercial Trust closed at S$1.180

Mapletree Logistics Trust closed at S$1.260