| CGS CIMB |
OCBC |
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CapitaLand Joining Shanghai’s most coveted office area
■ CAPL has entered a JV to acquire c.70% of Pufa Tower in Shanghai, China for Rmb2,752m; this will be seeded into a commercial value-add fund. ■ Post-acquisition, CAPL will undertake a comprehensive asset enhancement initiative (AEI) to extract greater value. ■ We maintain our Add call with a TP of S$3.55.
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| RHB SECURITIES | UOB KAYHIAN |
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REITS Strategy: Yield Plays To Remain In Favour
US Fed’s dovish tone favours REITs. Growing uncertainty over global economic growth and persisting trade tensions have resulted in investors preferring safe haven-yield instruments, which is supportive for REITs. In addition, US Fed chairman Jerome Powell, in his latest statement, noted that the regulator will be more flexible on monetary policy and is in no rush to raise interest rates. The dovish tone is positive for REITs, as one of investors’ key concerns was a sharp spike in interest rates making REITs relatively unattractive. As such, investors’ continued appetite for yields and safe haven instruments is clearly visible, with 10-year US and SG bond yields currently at 2.66%/2.13%, down nearly 60 bps from their 2018 peak.
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Banking – Singapore A Dovish Twist, Limiting Upside For US Interest Rates
NIM expansion should moderate because the pace of rate hikes will be more gradual in 2019. However, banks have transformed into yield plays, which perform better when upward pressures on interest rates have eased. Our study on mean reversion indicates that the re-rating for DBS due to its management bench strength and benefits from rising interest rates are in the advanced stages. Maintain BUY on DBS and OCBC, but we prefer OCBC. Maintain OVERWEIGHT.
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Check out our compilation of Target Prices
