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Are Singapore REITs at tipping point?

Are Singapore REITs at tipping point?

There has been a lot of talk - and perhaps growing concern - that regulatory changes may be introduced to the Singapore REITS when the Singapore Budget is announced on 23 February. In view of the easy operating and tax regime that the Singapore REITS operate in, the possibility of misapplication of these rules may sometimes give the REIT managers different priorities to REIT investors. MAS is keen to prevent this, and could close the loop holes for these managers. This could be a game changer for how business is carried out for this sector and, with it, a threat to the strong price performance REIT names have enjoyed in the local market. Further out, stronger headwinds for the local REITs could come in the form of rising US interest rates. As yield investments, REITs are priced inversely to interest rates. US treasuries have recently been sold down in price as yields have started to climb once more with the US economy showing signs of a stronger-than-expected recovery. After a rally of almost 20% this past year, the S&P Global REIT index is showing signs of fatigue. Similarly, Singapore REITs have provided a total annual average return of 26% including dividends. Fortune REIT has been the leader of the pack, returning 55% while Keppel REIT, the weakest amongst the sector, even managed a modest 15% annual return. Perhaps investors should consider taking some money off the table, locking in good profits here. Perhaps shorting is in order.

Earnings Update:

Comfort Delgro

Comfort Delgro reported after the close of trading last night. Full-year revenue increased by 8.1% to $4.05 billion on broad-based growth, with their UK bus business the stand out. Net profit came in at $283.5 million, a 7.7% improvement. The company executed well overseas with contributions from their foreign businesses providing almost 49% to the bottom line. Significantly, the overseas bus business’ operating profit continued to outstrip those of the Singapore bus business and accounted for 91.0% of Group bus operating profit. The stock reversed mid- way during trading yesterday, turning down to close at $3.14 after trading earlier as high as $3.26. At this level, upside looks limited for the stock.

Cisco Systems

$0.53 versus a street of $0.51, while 10% a dividend increase on stock saw buyers in the after market.


Beat estimates, 11% rise in Q3 net profit to $970 million. Home and regional businesses registered strong performance.


Oil sellers are plentiful. Traders only needed a reason to move and the EIA offered them this direction when its weekly inventory of US oil stockpiles came in above forecasts. WTI broke back below $50 a barrel while Brent Crude was dragged down below $55. From a technical perspective, oil needs to retest its recent lows (WTI-$43.50: Brent $45) successfully before any near bottom for the commodity can be ascertained. Failing to hold these levels may see new uncharted levels, with downside for WTI possibly in the $35 range.

North American Indices

All three major US indices look primed for a move up from here. The Nasdaq 100 looks the most interesting of the three. A convincing break above the 4300 level could see it test 4500 and even possibly its ‘dot com’ high of 4800. Incidentally, the Nasdaq remains the only one of the three major US indices yet to breech its 2000 high. With key tech names like Apple, Intel and CISCO trading at fair valuations of 15 to 16x PER, this sector deserves a fresh look away from the troubled energy sector. Further, with their strong balance sheets and cash holdings, many experts foresee a new round of capex into new technologies associated to cloud computing, mobile/wearable devices and in 3D printing, and the like. This move could lead in turn to a new replacement cycle for the world’s aging stock, and further overall investment in IT. The US30 remains well supported above 17,500, trading between 17,500 and 18,000, near the top of a broader 17,000-18,000 range. RSI is above 50; encouraging but it needs to clear 60 to indicate a clear upturn in momentum. The SPX500 continues to trade in the upper half of a 1,980 to 2,070 trading channel. RSI holding above 50 suggests upward momentum building. The next resistance on a breakout will be near 2,100, with initial support rising toward 2,045.
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