Both Oversea-Chinese Banking Corporation (OCBC) and United Overseas Bank (UOB) have only made single-digit returns since the start of the year. The list is in the table below sorted from worst performers to best performers.
For the STI to get to JP Morgan’s 5,000 target, these two banks (OCBC and UOB) could move up a tad more, and the laggard REITs in the STI could register gains instead of year-to-date losses. On the other hand, analysts are expecting the banks’ 2Q2025 earnings to be under some pressure from their net interest margins given that three-month Sora has tumbled.
Interestingly, this should benefit the REITs and early 2Q2025/1H2025 reporting shows that REITs' DPUs have steadied and are improving. For instance, Suntec REIT announced q-o-q distribution per unit (DPU) growth, and lower average cost of debt. Its interest coverage ratio has also improved despite headwinds in its UK and Australian office buildings.
See also: STI to continue correction; here are the supports for Sembcorp, DBS and STE
The FTSE ST REIT Index (REIT Index) has broken out of the top of the minor base formation at the 650-660 range. One-year momentum is rising, along with quarterly RSI and short term oscillators. The breakout indicates an upside of 720.
The Mapletree REITs have lagged the STI along with REITs with lots of non-Singapore assets. Interestingly, CapitaLand China Trust, which was one of the worst performers in April, is now one of the best performers. The listing of the Capitaland Commercial C-REIT (CLCR) seems to have helped CLCT realise better valuations.
However, at 79 cents, it is still trading at a discount to NAV versus C-REITs, which are trading at much tighter yields.
See also: STI's consolidation is likely to persist; Sembcorp's decline should find support at $6.17
For small- and mid-caps (SMC), we have filtered stocks with the lowest historic P/E ratios for stocks with market caps of between $1 billion and $100 million.
Some of these stocks could benefit from the improved sentiment around the local market. Among them are Singapore’s first de-spac, 17Live, which also had a single-digit total return year-to-date.
Tables and charts: Bloomberg
