S-REITs Weekly - UOB Kay Hian 2020-06-23: Rotate & Reposition Towards Retail & Hospitality REITs For Outperformance In 2H20

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S-REITs Weekly - Rotate & Reposition Towards Retail & Hospitality REITs For Outperformance In 2H20




WHAT HAPPENED LAST WEEK


UOBKH S-REIT Index retraced 0.3% to 249.6 last week.

  • The Multi-Ministry Taskforce announced an earlier start to Phase Two on 18 Jun 20. Retail businesses re-opened their physical outlets, while food & beverage dine-in was allowed, subject to liquor sales and consumption ceasing at 10:30pm. Sports, parks and other public facilities also opened. Small-group social gatherings of up to five persons can resume. Individuals must maintain safe distancing of at least 1m at all times.

Top outperformers.


Top underperformers.



SPOTLIGHT – MID-YEAR REVIEW

  • COVID-19 was detected in Wuhan, China, and was first reported to the World Health Organisation (WHO) Country Office in China on 31 Dec 19. The outbreak was declared a Public Health Emergency of International Concern on 30 Jan 20. WHO made the assessment that COVID-19 can be characterised as a pandemic on 11 Mar 20. By then, COVID-19 has spread beyond Asia to Europe and North America.

Steep sell-off in March, followed by gradual recovery in 2Q20.

  • Initially, the stock market was unruffled by COVID-19 outbreak and our S-REIT index gained 4.7% in January. S-REITs only started to react by correcting 7.6% during the last week of February. With COVID-19 spreading rapidly in Europe and North America, our S-REITs index corrected another 31.5% during the first three weeks of March.
  • Many countries have since instituted strict social distancing measures and lockdowns. Confidence gradually recovered with governments responding swiftly with proactive fiscal and monetary policies, which engendered a recovery for S-REITs.

Resiliency from industrial and healthcare REITs in 1H20.


Zero interest rates for two-and-a-half years.

  • The Fed wants to provide an environment in which displaced workers have the best chance to go back to their old jobs or find new ones. All 17 FOMC participants (100%) expect to hold Fed funds rates near zero in 2021 and 15 of them (88%) projected Fed funds rates near zero until 2022. This means another two-and-a-half years of zero interest rates.

Assurance of the Fed’s dovish disposition positive for S-REITs.






Jonathan Koh CFA UOB Kay Hian Research | Loke Peihao UOB Kay Hian | https://research.uobkayhian.com/ 2020-06-23
SGX Stock Analyst Report BUY MAINTAIN BUY 2.600 SAME 2.600
BUY MAINTAIN BUY 2.850 SAME 2.850
BUY MAINTAIN BUY 1.160 SAME 1.160
BUY MAINTAIN BUY 0.620 SAME 0.620
BUY MAINTAIN BUY 1.300 SAME 1.300



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