In August, S-REITs saw over $90 million in institutional inflows, marking the second consecutive month of net inflows after $15 million in July. In contrast, the first half of the year experienced net outflows. The iEdge Singapore REIT Index (iEdge S-REIT Index) recorded positive returns for the second month in a row, achieving a total return of 6.7% in August. Following a total return of 5.5% in July, the first two months of the second half of 2024 have seen a cumulative increase of 12.6%, successfully reversing the 11.4% decline in total returns experienced in the first half of the year.

Data Source: uSMART SG

Top 10 REITs with Highest Total Returns in August

Data Source: Company Filings, Bloomberg, Singapore Exchange

The average total return for the top 10 REITs in the iEdge S-REIT Index is 11.4%, surpassing the index’s total return of 6.7%.

Optimistic Outlook for S-REITs Driven by Potential Fed Rate Cut

1. Interest Rate Sensitivity: The real estate sector is highly sensitive to interest rates, with bank borrowing playing a crucial role in the capital management of REITs. An anticipated rate cut could lower borrowing costs for REITs, particularly those with a high proportion of floating-rate debt or refinancing needs. Additionally, rising property valuations may enhance the net asset value of these trusts, encouraging increased investment inflows.
2. High Dividend REITs: High dividend REITs attract investor interest in an environment of expected low interest rates and market volatility. Adopting a high dividend strategy can provide investors with a relatively stable income source and partially mitigate market fluctuations. Typically, REITs are required by regulation to distribute at least 90% of their net profits to shareholders while maintaining a debt-to-equity ratio (also known as the debt-to-equity ratio) below 50%.
3. Sector-Specific Recovery: With improvements in regional economic activity and tourism, local retail and hospitality REITs may see significant gains. Additionally, there are more substantial recovery factors for major indices, especially with the upcoming F1 race in Singapore.

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