SECTOR ROUND-UP
In the FOMC meeting on 19-20 March, we expect the federal funds rate to remain at 5.25-5.5% for the fifth straight meeting. The Fed remains on track to cut interest rates this year, but expectations of any rate cuts have been pushed to 2H24, resulting in the S-REITs Index’s poor performance. With lower interest rates, S-REITs will experience 1) lower financing costs, 2) higher dividend yield spreads over bonds, and 3) higher property valuations as cap rates compress. Furthermore, with interest rates peaking, we expect deal-making to return in full swing. Therefore, we expect a sector recovery in 2024-2025.
Prime US REIT’s CEO, Mr Harmeet Singh Bedi, has resigned. Mr Rahul Rana, a shareholder of KBS Asia Partners Pte. Ltd., which is, in turn, the sponsor of Prime US REIT, will take over as CEO of the manager. Due to this change in management, our recommendation for Prime US REIT is now under review until further notice.
Retail
Jan 24 retail sales index (excluding motor vehicles) fell 2.1% YoY, compared with the 2.8% decline in Dec 23. The wearing apparel & footwear industry was the biggest decliner at 11.8% YoY due to lower demand for wearing apparel. The food & alcohol and watches & jewellery industries recorded the highest YoY growth at 8.5% and 5.3% respectively.
The F&B services index fell 5.6% YoY in Jan 24, after the 0.4% growth in Dec 23, with restaurants registering a YoY decline of 16%. This was due to Chinese New Year being celebrated in February in 2024 while it was in January in 2023. However, we think retail sales will be resilient in 2024 boosted by the extra S$600 in CDC vouchers, cash payments of S$200 to S$400 for eligible Singaporeans, and S$200 in LifeSG credits for all national servicemen.
Source: Phillip Capital Research - 18 Mar 2024
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Created by traderhub8 | Jun 12, 2024
Created by traderhub8 | Jun 03, 2024