“Our macro team expects the tariff war to have a deflationary impact in Singapore. The team forecasts 2025 GDP growth of 2.1% and 1.8% in 2026 for Singapore, penciling in a growth slowdown, but not a recession at this stage,” says Guha in his April 16 report.
The Maybank team has also lowered its three-month Singapore overnight rate average (SORA) projection to 2.0% for 2025, down from 2.65% at the start of the year.
In 2H2025, the team is anticipating a fiscal support package and the Monetary Authority of Singapore (MAS) to have a “potential neutral stance” in the event of a deep technical recession. “All in, while a slowdown is imminent, there are levers to cushion the impact,” Guha writes.
Yet, the analyst is also prepared for the worst.
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While this isn’t Maybank’s base case, Guha notes that peak-to-trough spot rents fell by high single digits to 30% during the GFC cycle. At the time, retail was relatively less impacted while office and hotel REITs fared the worst. Industrials remained in the middle.
At the same time, asset prices fell by 11% to 24%. Listed REITs also saw distributions per unit (DPUs) fall by mid-teens to high 40%. Occupancy rates fell by five percentage points then and dilutive capital raising was conducted to lower gearing by 15 percentage points.
“A sharp fall in the Fed Funds Rate from 3Q2007 could not stop the DPU and net asset value (NAV) declines. Except for hotels, operational metrics took some time to show the deterioration,” he recalls.
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As a result, Guha is recommending investors to remain “selective” amid the macro uncertainty.
For FY2025 and FY2026, the analyst has also lowered his DPU estimates by 5% for both years.
“This is led by a c.10% decline in net property income (NPI), offset by lower borrowing costs,” he explains. “Hospitality sees the steepest cut followed by office while healthcare is relatively stable.”
While the analyst has maintained his risk-free rate at 2.75%, in line with the house’s view, he has applied a higher discount rate to REITs such as Lendlease Global Commercial REIT (LREIT), OUE REIT , ESR REIT and AIMS APAC REIT (AA REIT) to factor in relatively higher gearing, which includes hybrid instruments. As such, he has downgraded these REITs, as well as CDL Hospitality Trusts (CDLHT) and Far East Hospitality Trust (FEHT) to “hold”.
At the same time, Guha has tactically upgraded Mapletree Pan Asia Commercial Trust (MPACT) to “buy” due to its estimated dividend yield of 7.3% and 35% discount to book valuation.
Among the REIT sub-sectors, Guha still prefers retail and healthcare the most, followed by industrials and offices. Hospitality REITs are the least preferred at the moment.
“We do not expect any negative surprises in the upcoming results season and REITs may actually benefit from the lower base rates that started to come down from mid-4Q2024,” says Guha. “That said, our focus will be on operating guidance and funding strategies.”
Among the REITs, the analyst favours CapitaLand Integrated Commercial Trust (CICT), CapitaLand Ascendas REIT (CLAR), CapitaLand Ascott Trust (CLAS), Mapletree Logistics Trust (MLT), MPACT and Parkway Life REIT (PLife REIT). Maybank has dropped its coverage of Frasers Hospitality Trust (FHT).
