Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Asia’s leading multi-asset exchange

SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Equity Bottom-Up

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S-REITs demonstrated resiliency amidst the backdrop of rising inflation and a rate hike cycle. The iEdge S-REIT Index posted +1.3% total returns in 1Q22, outperforming the average -4.9% across global REIT hubs. 
	 </li>
	<li>
Despite rising rates, S-REITs average dividend yield of 6.3% still offer around 400bps spread over Singapore’s 10Y SGS bond yields. Debt levels remain controlled with sector average gearing ratio of c.37% and an average 75% of their borrowings pegged at fixed rates.   
	 </li>
	<li>
The top performing S-REITs and property trusts are mainly from the hospitality and office sub-segments. Singapore’s re-opening and CBD Grade A office rental momentum were key drivers for price performances.
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SREITs resilient in the near-term with controlled debt levels and relative higher dividend yields 
1Q22 global equity markets performances were governed by geopolitical tensions, a rate hike cycle in US and rising inflation. Given REITs’ general sensitivity to interest rates changes, global REITs markets were also impacted. The FTSE EPRA Nareit Developed Index posted a 3.8% decline in the quarter. Major REIT benchmarks in Australia, Japan, Hong Kong and US posted -4.9% average total returns in the same period. The S-REITs sector was a notable outperformer and demonstrated resiliency, despite near-term macro headwinds, with the iEdge S-REIT Index returning 1.3%. 
Despite the backdrop of increasing rates (where Singapore Government Securities 10Y bond yields increased 64bps on a year-to-date basis), S-REITs with the sector average dividend yield of 6.3% (as of end February ’22), are still offering a higher spread of around 400bps. Further, the sector appears to have controlled debt levels, with an average gearing ratio (total debt/total assets) of c. 37%, lower than the regulatory limit of 50%. The sector has also on average secured 75% of their borrowings on fixed rates. 
According to Beansprout (an independent research firm), Singapore’s REIT benchmark generated positive returns in previous episodes of interest rate increases: 25.8% total return in (June ’04 to 2006) and 11.9% total return (December ’15 to December ’16).
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 <div class='content-caption'>SREIT outperformed global REITs hub in 1Q22</div>
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Top performing S-REITs &amp; Property Trusts in 1Q22 averaged +14.1% total returns 
The top performing S-REITs and property trusts in the recently concluded quarter are mainly from the hospitality and office sub-segments, with the top five performing names averaging +14.1% total returns (see table below), outperforming the STI’s +9.6%. 
Two drivers that potentially drove the sub-segments were:

<ul>
<li>
Reopening theme. Singapore’s announcement on decisive reductions to safe management measures and cross-border travel requirements, in line with significant relaxing of containment measures seen across ASEAN. This may potentially drive increased demand in retail and travel. 
	 </li>
	<li>
Momentum in office rental. Grade A office rents in Singapore’s CBD posting highest pace of quarterly growth since 2Q21 (+2.3% YoY in 1Q22), marking the third consecutive quarter of accelerated growth, according to data from JLL Singapore.</li>
</ul>
<table class="table table-striped"><tbody>
<tr>
<td>
			Stock Name 
			</td>
			<td>
			Code
			</td>
			<td>
			Mkt Cap S$M
			</td>
			<td>
			1Q22 Total Return %
			</td>
			<td>
			Div Yield (%)
			</td>
			<td>
			Gearing Ratio (%)
			</td>
		</tr>
<tr>
<td>
			Suntec REIT
			</td>
			<td>
			T82U
			</td>
			<td>
			5,018
			</td>
			<td>
			17.6
			</td>
			<td>
			5.4
			</td>
			<td>
			43.7
			</td>
		</tr>
<tr>
<td>
			Frasers Hospitality Trust
			</td>
			<td>
			ACV
			</td>
			<td>
			1,030
			</td>
			<td>
			15.1
			</td>
			<td>
			2.2
			</td>
			<td>
			42.5
			</td>
		</tr>
<tr>
<td>
			Far East Hospitality Trust
			</td>
			<td>
			Q5T
			</td>
			<td>
			1,285
			</td>
			<td>
			13.1
			</td>
			<td>
			4.5
			</td>
			<td>
			38.3
			</td>
		</tr>
<tr>
<td>
			CDL Hospitality Trust
			</td>
			<td>
			J85
			</td>
			<td>
			1,588
			</td>
			<td>
			13.0
			</td>
			<td>
			3.8
			</td>
			<td>
			39.1
			</td>
		</tr>
<tr>
<td>
			Ascott Residence Trust
			</td>
			<td>
			HMN
			</td>
			<td>
			3,710
			</td>
			<td>
			11.5
			</td>
			<td>
			4.2
			</td>
			<td>
			37.1
			</td>
		</tr>
</tbody></table>
Source: Bloomberg, SGX

Note: Dividend yield and gearing ratio extracted from March edition of SGX SREITs &amp; Property Trusts Chartbook. Market capitalization as of 31 March 2022
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S-REITs demonstrated resiliency amidst the backdrop of rising inflation and a rate hike cycle. The iEdge S-REIT Index posted +1.3% total returns in 1Q22, outperforming the average -4.9% across global REIT hubs. 
	 
	
Despite rising rates, S-REITs average dividend yield of 6.3% still offer around 400bps spread over Singapore’s 10Y SGS bond yields. Debt levels remain controlled with sector average gearing ratio of c.37% and an average 75% of their borrowings pegged at fixed rates.   
	 
	
The top performing S-REITs and property trusts are mainly from the hospitality and office sub-segments. Singapore’s re-opening and CBD Grade A office rental momentum were key drivers for price performances.


 

SREITs resilient in the near-term with controlled debt levels and relative higher dividend yields  
1Q22 global equity markets performances were governed by geopolitical tensions, a rate hike cycle in US and rising inflation. Given REITs’ general sensitivity to interest rates changes, global REITs markets were also impacted. The FTSE EPRA Nareit Developed Index posted a 3.8% decline in the quarter. Major REIT benchmarks in Australia, Japan, Hong Kong and US posted -4.9% average total returns in the same period. The S-REITs sector was a notable outperformer and demonstrated resiliency, despite near-term macro headwinds, with the iEdge S-REIT Index returning 1.3%.  
Despite the backdrop of increasing rates (where Singapore Government Securities 10Y bond yields increased 64bps on a year-to-date basis), S-REITs with the sector average dividend yield of 6.3% (as of end February ’22), are still offering a higher spread of around 400bps. Further, the sector appears to have controlled debt levels, with an average gearing ratio (total debt/total assets) of c. 37%, lower than the regulatory limit of 50%. The sector has also on average secured 75% of their borrowings on fixed rates.  
According to Beansprout (an independent research firm), Singapore’s REIT benchmark generated positive returns in previous episodes of interest rate increases: 25.8% total return in (June ’04 to 2006) and 11.9% total return (December ’15 to December ’16).



      
    
    SREIT outperformed global REITs hub in 1Q22


Top performing S-REITs &amp; Property Trusts in 1Q22 averaged +14.1% total returns  
The top performing S-REITs and property trusts in the recently concluded quarter are mainly from the hospitality and office sub-segments, with the top five performing names averaging +14.1% total returns (see table below), outperforming the STI’s +9.6%.  
Two drivers that potentially drove the sub-segments were:



Reopening theme. Singapore’s announcement on decisive reductions to safe management measures and cross-border travel requirements, in line with significant relaxing of containment measures seen across ASEAN. This may potentially drive increased demand in retail and travel. 
	 
	
Momentum in office rental. Grade A office rents in Singapore’s CBD posting highest pace of quarterly growth since 2Q21 (+2.3% YoY in 1Q22), marking the third consecutive quarter of accelerated growth, according to data from JLL Singapore.




			Stock Name 
			
			
			Code
			
			
			Mkt Cap S$M
			
			
			1Q22 Total Return %
			
			
			Div Yield (%)
			
			
			Gearing Ratio (%)
			
		


			Suntec REIT
			
			
			T82U
			
			
			5,018
			
			
			17.6
			
			
			5.4
			
			
			43.7
			
		


			Frasers Hospitality Trust
			
			
			ACV
			
			
			1,030
			
			
			15.1
			
			
			2.2
			
			
			42.5
			
		


			Far East Hospitality Trust
			
			
			Q5T
			
			
			1,285
			
			
			13.1
			
			
			4.5
			
			
			38.3
			
		


			CDL Hospitality Trust
			
			
			J85
			
			
			1,588
			
			
			13.0
			
			
			3.8
			
			
			39.1
			
		


			Ascott Residence Trust
			
			
			HMN
			
			
			3,710
			
			
			11.5
			
			
			4.2
			
			
			37.1
			
		

Source: Bloomberg, SGX

Note: Dividend yield and gearing ratio extracted from March edition of SGX SREITs &amp; Property Trusts Chartbook. Market capitalization as of 31 March 2022



Top 5 S-REITs & Property Trusts Averaged 14.1% Total Returns in 1Q22