OCBC Investment Research
Date of Report: 30 April 2025

Global Markets Rally on Tariff Easing, Strong Corporate Earnings, and Supportive Policy Shifts: In-Depth REIT and Equity Analysis

Market Overview: Optimism Amid Tariff Easing and Earnings Strength

Global equity markets closed higher as investor sentiment was buoyed by expectations that major corporates would withstand slowing economic growth and ongoing tariff disruptions. A pivotal executive order from President Donald Trump, easing the impact of auto tariffs, provided a positive catalyst amid continuing US-China trade negotiations. Major US indices saw modest gains, with the Dow Jones Industrial Average surging 0.75% (+300 points), S&P 500 up 0.58%, and Nasdaq advancing 0.55%. Ten-year US bond yields dropped below 4.2%. The US dollar strengthened, while gold and oil prices retreated.

Key Market Highlights

• US consumer confidence declined more than expected; job openings dropped 3.9%.
• Markets looked past weak data, focusing on potential progress in tariff negotiations.
• In Europe, the Stoxx Europe 600 rose 0.36%, led by banking and healthcare sectors.
• Asia-Pacific equities advanced, with the MSCI Asia Pacific Index up 0.7% on Chinese tech gains and strong Indian earnings.
• Singapore’s Straits Times Index slipped 0.2% despite higher trading volumes.
• Global FX: USD broadly stronger; commodities like oil and gold declined.

CapitaLand Ascendas REIT (CLAR SP): Strong Rental Reversions Offset by Weaker Occupancy

• Robust portfolio rental reversions of +11.0% in 1Q25, accelerating from 4Q24’s +8.6% and above management’s mid-single digit guidance for FY25.
• Geographic rental reversions: Singapore +7.0%, US +10.3%, Australia +59.0%; no renewals in UK/Europe.
• Singapore breakdown: Industrial/data centres +9.0%, business space/life sciences +5.8%, logistics +2.5%.
• US: Business space/life sciences +0.7%, logistics +11.5%.
• Australia: Logistics segment drove +59.0% reversion, likely due to lease renewals at higher market rates.

Despite strong rental growth, portfolio occupancy fell 1.3 percentage points quarter-on-quarter to 91.5%, with declines across all regions. Australia saw the largest drop (down 3.3 ppt to 89.2%), attributed mainly to a logistics property in Sydney dropping from full occupancy to zero, though tenant negotiations are underway. Brisbane’s business space asset saw a sharp 34.4 ppt drop to 60.2%, with partial commitments secured. Singapore and US portfolios slipped by 0.9 ppt to 91.6% and 88% respectively; UK/Europe declined slightly to 98.9%.

Aggregate leverage rose to 38.9% (from 37.7% as at 31 Dec 2025), partly due to a US logistics property acquisition in Indiana for USD115.8m (SGD150.3m), which is expected to yield 7.6% initial net property income. Weighted average all-in debt cost fell 10 bps to 3.6%, but debt hedged dropped from 82.7% to 73.6%. DPU forecasts for FY25 and FY26 were raised by 0.5% and 0.6% respectively, factoring in lower debt costs, but partially offset by FX changes and lower occupancy. Cost of equity increased from 6.6% to 6.8% due to higher market volatility, trimming the fair value estimate from SGD3.30 to SGD3.21.

ESG Highlights

• ESG rating upgraded in September 2023, driven by corporate governance improvements, transparent executive pay, and robust ethics policies.
• About 30% of borrowings are green financing; long-term goal for all properties to achieve minimum green rating by 2030.
• Targets: zero validated discrimination or corporate governance lapses, comprehensive employee compliance training.

Stoneweg European REIT (SERT SP): Logistics Strength Offsets Office Weakness

• Indicative 1Q25 DPU of 3.374 Euro cents, down 3.7% year-on-year due to higher interest costs, but 0.3% higher quarter-on-quarter.
• Gross revenue rose 0.5% YoY to EUR53.6m; net property income up 2.4% YoY to EUR33.5m, aided by reversal of bad debt provisions.
• On a like-for-like basis, NPI would have risen 7.4% YoY.
• Distributable income fell 4% YoY to EUR18.9m, exceeding expectations at 27.5% of full-year forecast.

Operationally, SERT’s portfolio occupancy slipped 1.5 ppt QoQ to 92%. Offices saw a sharper drop (-5.2 ppt QoQ to 85.7%), while logistics and industrial (L&I) assets were stable (-0.2 ppt to 94%). Rental reversions averaged +1.7%: L&I assets up 4.9%, offset by soft office performance (-0.6%). Management remains positive on rental reversions, citing portfolio under-rented by 6-7%. A 20-year lease renewal with NN Group NV (with green upgrades to Haagse Port, The Hague) was also announced.

Leverage increased 1.7 ppt to 42.9% (from 41.2% at end-2024) due to CAPEX drawdowns and refinancing activity. A EUR450m bond at 2.1% was refinanced with a EUR500m bond at 4.25%, raising all-in interest to 4.16% (with 89% of debt hedged). FY25 and FY26 DPU forecasts were raised 6.3% and 6.1%, respectively, but fair value was maintained at EUR1.81 (BUY), with a forecasted FY25 distribution yield of 8.7%, reflecting increased cost of equity (9%) and lower terminal growth (1.25%) due to macro uncertainty.

ESG Highlights

• ESG rating downgraded in December 2024 due to non-pay benefits, though employee training improved (22.6 hours/employee in 2024).
• Corporate governance strong with majority-independent board.
• Opportunities in green buildings, with 48 green certifications and target for net zero operational carbon emissions by 2040.

Frasers Centrepoint Trust (FCT SP): Resilient All-Rounded Performance

• 1HFY25 DPU increased 0.5% YoY to 6.054 Singapore cents (50.1% of full-year forecast).
• Gross revenue and NPI rose 7.1% and 7.3% YoY to SGD184.4m and SGD133.7m, respectively.
• Distributions from investments surged 83.2%; stable finance costs (-1.6%).
• Cathay Cineplexes, a cinema tenant, owed SGD2.7m in unpaid rents; partial payment received and intent to remain at two malls confirmed.

Rental reversions were robust at +9.0% in 1HFY25, covering 10% of retail net lettable area, with all malls achieving rental uplifts. Key malls with double-digit reversions: Tampines 1 (+13.3%), Century Square (+11.6%), Causeway Point (+10.0%). Portfolio occupancy remained flat at 99.5% (excluding Hougang Mall under AEI), with all malls above 90% occupancy (except White Sands at 98.7%). Shopper traffic and tenant sales grew 1.0% and 3.3% YoY, respectively.

Aggregate leverage declined from 39.3% to 38.6%, with no refinancing due for the rest of FY25. Debt hedging increased to 75.8%, and average cost of debt fell 10bps to 3.9% (2QFY25: 3.8%). Funding for the proposed Northpoint City South Wing acquisition was secured at 3.25%, below the 3.4% assumption. Perpetual securities (cost ~4.2%) may be used for part of the financing. FY25 and FY26 DPU forecasts were raised by 0.6% and 1.3%, increasing the fair value estimate to SGD2.50.

ESG Highlights

• ESG rating upgraded in June 2024, led by strong talent management, business ethics, and green building initiatives.
• Solar panel installation and 36 new EV charging points planned across 12 malls, supporting the sponsor’s net-zero 2050 goal.
• All 10 properties at least BCA Gold certified; four consecutive years with 5-Star GRESB Real Estate Assessment.

China Strategy: Politburo’s Policy Pivot and Stimulus Trajectory

The April Politburo meeting signaled a more supportive policy tone, calling for a front-loading of the approved CNY2 trillion stimulus plan, but stopped short of new measures. Policymakers emphasized the need to coordinate domestic policy and accelerate implementation in light of “increasing impact of external shocks.” Additional fiscal support of CNY1-1.5 trillion is expected in 2H25, with further stimulus possible depending on tariff impacts. The July Politburo meeting is the next key milestone for policy clarity.

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Conclusion: Navigating a Volatile, Opportunity-Rich Landscape

Global markets are navigating a complex landscape of policy pivots, trade tensions, and shifting economic data. Despite near-term uncertainties, robust earnings and strong rental reversions in key REITs highlight enduring opportunities for investors. Ongoing attention to ESG practices, leverage management, and policy responses—especially in China—will be vital. Stay tuned for upcoming policy developments, particularly from China’s July Politburo meeting, and continue to monitor sector-specific dynamics as highlighted in this comprehensive review.