To The Moon

$CapitaLandInvest(9CI.SI)$ $CapLand IntCom T(C38U.SI)$ $CapLand Ascendas REIT(A17U.SI)$

If you've been monitoring the Singapore REIT (S-REIT) market lately, you've probably noticed a familiar trend: prices are drifting downward again. It feels like a rinse-and-repeat cycle where every REIT sell-off gets blamed on rising interest rates. That's not an irrational thought—higher rates do put pressure on real estate investment trusts. But in this case, it might be the wrong conclusion.

Here's the twist that almost no one is talking about: Singapore interest rates are actually falling.

The 6-month Singapore Treasury Bill now yields around 2.30%, while the 1-year bill is offering just 2.29%. Yet even as yields drop, S-REITs across the board—from blue-chip names like CapitaLand Integrated Commercial Trust (CICT) and CapitaLand Ascendas REIT (CLAR) to smaller hospitality players—are struggling.

So what gives? If local borrowing costs are improving, shouldn't REITs be rallying?

Let’s dive into why this disconnect exists, and why the real issue might not be in Singapore at all—but in the United States.

The Market Is Looking at the Wrong Signal

The real source of fear isn’t the MAS or the Singapore bond market. It's the U.S. 10-year Treasury yield, which has recently breached 4.5% again. For seasoned REIT watchers, this is a red flag. I call the 10-year Treasury the "REIT fear index."

Why? Because global asset managers benchmark real estate yields against it. As the U.S. risk-free rate climbs, the risk premium for REITs must widen to stay attractive. That puts downward pressure on prices, even in markets like Singapore where fundamentals are stable or even improving.

But here’s the critical point: Singapore is not the United States.

Singapore's inflation is lower. Its monetary framework is different. Its bond yields are trending downward. And yet, investors are reacting to U.S. headlines as though Jerome Powell sets the cost of debt for Parkway Parade or Funan Mall.

Understanding Singapore’s Monetary Environment

Singapore’s central bank, the Monetary Authority of Singapore (MAS), doesn’t use interest rates as its main tool. Instead, it manages monetary policy through the Singapore dollar’s exchange rate against a basket of currencies.

Recently, MAS has paused its tightening cycle, effectively signaling that inflation is under control. As a result, local bond yields have been drifting downward. Demand for government securities remains strong, with healthy bid-to-cover ratios at recent auctions.

And this isn’t just a short-term blip. Singapore has:

• A AAA sovereign credit rating

• Robust current account surpluses

• Fiscal prudence and a strong reserve position

That makes the city-state a global safe haven, especially in times of uncertainty. When global risk appetite wanes, capital flows to Singapore, anchoring bond yields and making financing conditions more attractive.

The Disconnect Between Market Perception and Reality

Despite these positives, REIT prices are falling. The market is conflating U.S. fears with Singapore fundamentals. And that creates an opportunity.

Let’s look at what’s actually happening on the ground.

REITs Quietly Lowering Interest Costs

We combed through the most recent quarterly earnings from several REITs and found a consistent theme: borrowing costs are declining.

1. Frasers Centrepoint Trust (FCT)

This suburban retail REIT has been a quiet performer since COVID. Shoppers have returned, rental reversions are turning positive, and now, interest expense is improving.

• Interest rate: Dropped from 4.0% in Q4 2024 to 3.8% in Q1 2025

• Impact: On a $1 billion debt portfolio, that’s roughly $2 million in annual interest savings

• Price: Down from $2.26 to $2.19 (a 3.1% drop) between May 2 and May 16

2. CapitaLand Integrated Commercial Trust (CICT)

Singapore’s flagship retail-office REIT is seeing similar tailwinds.

• Interest rate: Dropped from 3.6% to 3.4%

• Balance sheet: Investment-grade, with staggered debt maturities

• Price: Down 2.8% over two weeks

This is the sort of REIT where fundamentals are solid, yet the market is pricing in fear that may not apply.

3. Far East Hospitality Trust (FEHT)

Tourism is picking up, and this small-cap REIT is getting a boost.

• Interest rate: Dropped from 4.1% to 3.5%

• Occupancy: Rising steadily as international travel rebounds

• Price: Slight uptick from $0.555 to $0.565

4. OUE Commercial REIT (OUE C-REIT)

A higher-risk REIT with exposure to hotels and overseas assets, but even here, interest costs are improving.

• Interest rate: Down from 4.7% to 4.2%

• Refinancing: Slightly easier now, though not risk-free

• Price: Down 3.4%

The Market Isn’t Rewarding Lower Costs—Yet

In finance, falling borrowing costs are a good thing. They improve margins, reduce refinancing risk, and free up capital for growth or distributions. Yet in today’s market, these positive developments are being ignored.

Why? Because macro fear is overpowering micro fundamentals.

The typical investor sees Powell delaying rate cuts, and concludes, "REITs must be doomed." But that logic only works if you’re buying REITs with U.S. exposure. For SGD-focused REITs, the exact opposite is happening.

A Word of Caution: Not All REITs Benefit Equally

Some REITs—like Keppel Pacific Oak US REIT (KORE) or Manulife US REIT (MUST)—have all their assets and liabilities in USD. These names remain vulnerable to U.S. interest rate trends and refinancing challenges.

If you're investing in them, be aware that falling SGD rates won't help. Their future depends on:

• U.S. leasing market recovery

• Refinancing at tolerable spreads

• Potential asset sales or restructuring

This is a different ballgame altogether.

What I’m Doing Personally

Here’s how I’m adjusting my portfolio based on the interest rate divergence:

• CICT remains a core position: Low volatility, strong assets, and now falling costs.

• FEHT added as a tactical play: Small exposure, improving fundamentals, and rising tourism.

• FCT gets a modest top-up: Still underrated, but a slow and steady grower.

• U.S. REITs are underweight: Too many macro risks and refinancing concerns.

I’m not buying indiscriminately, but I’m watching closely. If the market keeps selling off on U.S. fears while Singapore’s backdrop improves, I’ll be ready.

Final Thoughts: Follow the Right Compass

The investing world is noisy. Headlines shout about Powell and inflation. Markets sell off reflexively. But underneath the noise, reality often tells a different story.

Right now, that story is this: Singapore REITs are seeing lower interest costs, even as their prices fall.

Eventually, the market will catch on. When it does, the upside could be significant. Until then, those who stay informed and selective may find themselves in a stronger position than those who follow the herd.

So keep your eyes on the real signal, not the loudest one. In a mispriced market, information is your edge.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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