Singapore REITs - OCBC Investment 2016-08-18: FOMC Jul minutes suggest accommodative interest rates ahead

Singapore REITs - OCBC Investment 2016-06-30: Tailwinds ahead for defensive yield stocks ASCENDAS REAL ESTATE INV TRUST A17U.SI  FRASERS CENTREPOINT TRUST J69U.SI  KEPPEL DC REIT AJBU.SI 

Singapore REITs: - FOMC Jul minutes suggest accommodative interest rates ahead

  • The FOMC Jul meeting minutes released showed that members were divided over the urgency to hike rates, as there were expectations that inflation would remain low in the near term, while some officials believed the US labour market conditions were at or close to full employment. 
  • Following the release of the minutes, US Treasury yields fell and the USD experienced a pullback. 
  • Based on the fed funds futures rate, the probability of at least one rate hike by the end of the year stood at 48.5%. We believe this supports our thesis that there will be a structural shift towards a prolonged period of accommodative interest rates. 
  • The Fed will likely tread carefully as more concrete data points are needed to justify another rate hike given the fragility of the macro environment. 
  • It was also highlighted that the Committee’s view of economic conditions suggests that the fed funds rate will only be raised gradually, and is likely to remain for a period of time below levels that are expected to prevail in the long run. 
  • We reiterate our OVERWEIGHT rating on the S-REITs sector, with Frasers Centrepoint Trust [BUY; FV: S$2.32], Keppel DC REIT [BUY; FV: S$1.30] and Ascendas REIT [BUY; FV: S$2.66] as our top picks.

Wong Teck Ching Andy CFA OCBC Investment | http://www.ocbcresearch.com/ 2016-08-18
OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 2.66 Same 2.66
BUY Maintain BUY 2.32 Same 2.32
BUY Maintain BUY 1.30 Same 1.30