Outlook For S-REITs Bleak As Inflation Weighs -KE

Singapore REITs may face strong headwinds amid steepening Singapore bond yield curve, potential risks of higher interest rates, says Kim Eng Securities. Notes 10-year bond yield has spiked more than 100 basis points to 3.5% in past two weeks - fastest pace in 26 years - on inflation fears (Singapore's May CPI reading at 7.5%); "the issue here is that S-REITs will face difficulties in securing long-term funding to fund their acquisition growth and/or refinance short-term borrowings." Says current yield spread between S-REITs and 10-year SGD bonds has narrowed to under 200 basis points (below historical average), making REITs unattractive. FTSE ST Real Estate Investment Trust Index off 0.7% at 735.15