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Dovish-sounding Fed chair tempers rate rise expectations, boosting REITs as some sectors bottom out

Goola Warden
Goola Warden1/14/2019 07:30 AM GMT+08  • 7 min read
Dovish-sounding Fed chair tempers rate rise expectations, boosting REITs as some sectors bottom out
SINGAPORE (Jan 14): First, a quick recap of 2018. The FTSE ST Real Estate Investment Trusts Index fell 9.3%, outperforming the FTSE ST Real Estate Index, which dived more than 16% last year. Top 2018 price performers were retail REITs CapitaLand Mall Trus
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SINGAPORE (Jan 14): First, a quick recap of 2018. The FTSE ST Real Estate Investment Trusts Index fell 9.3%, outperforming the FTSE ST Real Estate Index, which dived more than 16% last year. Top 2018 price performers were retail REITs CapitaLand Mall Trust or CMT (+6%) and Mapletree Commercial Trust or MCT (+2%). The worst performers were First REIT, which fell 29% and Lippo Malls Indonesia Retail Trust, which collapsed 55%.

This year, REITs could continue to be in demand. US Federal Reserve chairman -Jerome Powell, in his latest statement, implied that the Fed would be more flexible on monetary policy and was in no rush to raise interest rates. He cited that cross-currents had emerged since 4Q2018 and indicated the Fed would tweak its quantitative tightening programme, which currently allows US$50 billion ($67.7 billion) in government debt and mortgage bonds to come off its books each month.

“We don’t believe that our issuance is an important part of the story of the market turbulence that began in the fourth quarter of last year. But, I’ll say again, if we reached a different conclusion, we wouldn’t hesitate to make a change,” Powell said at the American Economic Association’s annual meeting on Jan 4. “If we came to the view that the balance sheet normalisation plan — or any other aspect of normalisation — was part of the problem, we wouldn’t hesitate to make a change.”

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