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iEdge S-Reit Index Weekly Review 25 Mar 24

Hello all! How was your weekend? Hope you had a great rest.

Singapore Real Estate Investment Trust (S-REIT) Sector Developments for the week

While the US Federal Reserve announced a hold on interest rates last week, as anticipated, the disclosure that it expects three interest rate cuts by year-end provided considerable relief to investors. These investors had been anxious due to recent bullish US economic data that seemed to diminish the likelihood of interest rate reductions.

Fed Chair Jerome Powell mentioned that strong hiring data, by itself, was not a reason to maintain high interest rates. He also commented that recent strength in US economic data, such as the Consumer Price Index, was normal and that they would not overreact.

These comments were interpreted as further indications that the US Federal Reserve would soon be cutting interest rates, bringing much-needed relief to the higher borrowing costs plaguing the SREITs.

The chart above continues to illustrate the ongoing inverse correlation between the iEdge S-Reit Index (in blue) and the US 10-Year Treasury Bond Yield (in orange). Specifically, it shows that when the US 10-Year Treasury Bond Yield decreases, the iEdge S-Reit Index tends to rise.

The US 10-Year Treasury Bond Yield has fallen below 4.3%, likely in response to statements made by the US Federal Reserve. This suggests a reduction in bearish pressure on the iEdge S-Reit Index, which has indeed rebounded after testing a critical support region.

Meanwhile, we observe that the STI has retreated after encountering resistance, accompanied by a corresponding dip in the iEdge S-Reit Index.

The week ahead brings us a number of important US economic data releases, which include:

CB Consumer Confidence / Revised UoM Consumer Sentiment – Consumer surveys hold significant influence because the sentiment of consumers acts as a leading indicator of economic health. Positive consumer sentiment suggests that the economy is performing well, leading to increased consumer confidence and, likely, higher retail sales. Conversely, cautious sentiment may lead consumers to spend less, anticipating a potential economic downturn.

Speeches by FOMC Member Waller and Fed Chair Powell which may include comments regarding the current inflation and interest rate situation, potentially affecting market sentiments

Final GDP –¬†Gross Domestic Product measures the monetary market value of all goods and services produced within a country. It serves as a comprehensive indicator of economic activity and health, thereby exerting influence on the nation’s currency.

Unemployment Claims – Reports the number of individuals filing for government assistance due to job loss, seeking new employment. This figure is a critical indicator of the number of people currently unemployed and seeking support, reflecting the job market’s health and, by extension, the overall economy.

Pending Home Sales – Home sales trigger significant economic activities. The purchase of a house leads to the creation of renovation jobs for construction workers, various subcontractors, and services related to new homeownership, such as utilities, furniture, and more.

Core PCE Price Index – The Personal Consumption Expenditures (PCE) index, while similar to the Consumer Price Index (CPI), specifically focuses on the spending habits of individuals. It measures inflation in consumer goods and services, making it a crucial component of overall inflation analysis. High inflation as indicated by the PCE may prompt a central bank to increase interest rates as a measure to mitigate inflationary pressures.

These US economic data and events contribute to the overall picture of the US economy’s health. This, in turn, serves as a basis for the US Federal Reserve‘s interest rate policy. It is crucial to stay informed about these developments, as the SREITs sector is highly dependent on interest rate trends for cost management, which affects profits and distributions.

I cannot stress enough the importance of being selective with SREITs investments. Look for those demonstrating prudent cost management and active revitalization of their portfolios as key indicators of potential success.

I invest in the CSOP iEdge SREIT ETF on a weekly basis. This approach allows me to maintain exposure and diversification within the SREITs sector, while also averaging down my overall investment cost.

The dividend scrip units for Mapletree Logistics Trust have been credited and are now reflected in my holdings and trading details. Please find the links below.

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