Reits dim as hopes fade of big Fed cut

Diminished hopes of a sizeable interest rate cut by the US Federal Reserve at month's end continued to hinder local equities, with the effect most pronounced on real estate investment trusts (Reits).

The shine has come off most Reits in Singapore, with the iEdge S-Reit 20 Index losing 24.19 points or 1.7 per cent to 1,445.77 at yesterday's close.

Reits have, in recent weeks, been rallying strongly on market expectations of dovish central banks, with many reaching "expensive" valuations.

Last week, news that the Monetary Authority of Singapore was considering raising the current leverage limit for Reits sent them even higher - only for Friday's strong US jobs data to put an end to the rally for now.

That said, CGS-CIMB remains "overweight" on Reits but cautioned that investors should be selective when stock-picking.

The brokerage prefers "S-Reits with attractive valuations as well as the Reits with stock-specific catalysts".

CGS-CIMB's top picks include Suntec Reit (down $0.03 or 1.5 per cent to $1.95), Mapletree Commercial Trust (down $0.04 or 1.9 per cent to $2.05) and Keppel DC Reit (down $0.05 or 2.9 per cent to $1.67).Yesterday, the Straits Times Index (STI) edged down 4.77 points or 0.1 per cent to close at 3,329.46.

Elsewhere in the Asia-Pacific, it was a mixed day at the office. Australia, China, Hong Kong and South Korea closed lower while Japan and Malaysia ended with gains.

Vanguard Markets managing partner Stephen Innes said that markets remain cautious ahead of US Fed chair Jerome Powell's testimony today and the release of the Fed's June meeting minutes tomorrow.

This has "notably weighed on risk assets in Asia today (Tuesday) as investors head for the sidelines ahead of a deluge of Fed policy signalling this week", he added.

FXTM market analyst Han Tan noted: "This week's Fedspeak could have an outsized impact on market sentiment over the coming days as investors try to satiate their hunger for any further clues on the US monetary policy outlook."

In Singapore, trading volume clocked in at 1.22 billion securities, just over the daily average in the first five months of this year.

Total turnover came to $1.15 billion, 10 per cent above the January-to-May daily average. Across the market, decliners outpaced advancers 218 to 186.

Meanwhile, the benchmark index had 17 of the STI's 30 components trading in the red.

On yesterday's action in Singapore, CMC Markets analyst Margaret Yang told The Business Times: "Profit-taking activities were accelerated by the fact that the fundamental outlook remains weak, in particular among the manufacturing and export sector."

Among tech counters, Venture Corporation shares faced a sell-off from investors, closing $0.70 or 4.4 per cent lower at $15.20.

On Monday, Credit Suisse downgraded the electronics manufacturing services firm to "underperform" with a target price of $13.50. On the same day, DBS Equity Research maintained its "buy" call on Venture with a target price of $21.70. It seems that the bears won the tussle.

The local banks were mixed. DBS Group Holdings was $0.05 or 0.2 per cent lower at $25.32. OCBC Bank added $0.09 or 0.8 per cent to $11.40 and United Overseas Bank closed at $26.22, up $0.15 or 0.6 per cent.

Thai Beverage added 0.5 cent or 0.6 per cent to close at 87 cents on 27.6 million shares changing hands, the most active among benchmark index components.

Market observers said last week that the food and beverage player could be a potential partner of Anheuser-Busch InBev's Asia-Pacific unit after it lists in Hong Kong.

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