S-REITs on Shaky Ground: What Trump’s Win Means for Investors

In a blow to S-REIT investors, former U.S. President Donald Trump’s re-election has clouded hopes for a quick resolution to rising interest rates. Nearly two-thirds of Singapore-listed REITs and business trusts tumbled the day after election results were announced, as fears of prolonged inflation and slower interest rate cuts gripped the market.

A Shift in Expectations
Optimism was running high after the U.S. Federal Reserve signaled potential rate cuts earlier this year. Analysts had forecast a brighter outlook for S-REITs, which have faced mounting cost pressures and reduced distributions since the COVID-19 pandemic. However, Trump’s victory, coupled with persistent inflation, has led to a more cautious approach.

Maybank Securities analyst Krishna Guha now predicts a slower pace of rate cuts, reversing earlier expectations of imminent relief for REIT investors.

Mounting Challenges for REITs
Beyond U.S. monetary policy, S-REITs face headwinds on multiple fronts. In China, stimulus efforts have yet to reverse weak property market performance, while locally, slowing growth in the hospitality sector and weaker retail sales add to the challenges.

Despite these obstacles, there are bright spots. Data center REITs, including Keppel DC REIT and Digital Core REIT, reported robust earnings, driven by strong rent reversions and increasing demand linked to digital infrastructure.

Long-Term Opportunities Amid Short-Term Struggles
Year-to-date, the iEdge S-REIT Index has dropped 11.1%, with total returns of -5.5% after dividends. In contrast, Singapore’s benchmark Straits Times Index has delivered a stellar 22.2% return. This stark disparity may lead some investors to shift focus to bank stocks, which continue to benefit from higher interest rates.

Yet, analysts urge caution before abandoning S-REITs entirely. As interest rates are expected to gradually decline, REITs could regain momentum. Sectors like data centers and logistics remain attractive for long-term investors, particularly with the rise of artificial intelligence and e-commerce.

The Bottom Line
For now, S-REIT investors must embrace patience. While uncertainties linger, a clearer macroeconomic picture could signal brighter days ahead. For those willing to endure the wait, the rewards may still be worth the effort.

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