China’s steel market is not collapsing despite the property downturn. Instead, demand is stabilising at a lower level as manufacturing, exports and new energy sectors gradually replace construction-driven demand. This is not a demand collapse, it’s a structural shift from property to industrial and export-driven demand. What’s Really Happening The sharp drop in construction activity has clearly hurt steel demand: Property-related steel (like rebar) has fallen significantly Construction’s share of demand is shrinking But the broader market tells a different story: Total steel demand is only slightly below past peaks Manufacturing, shipbuilding and energy transition sectors are absorbing demand Exports are acting as a key buffer Instead of a sudden crash, the industry is entering a long plateau . Why This Matters The market had expected a sharp collapse but reality is more gradual: Demand is declining slowly, not falling off a cliff China is shifting from construction-led growth to ...
Singapore’s REIT sector is facing renewed pressure, with the S-REIT Index down around 6% year-to-date, as rising bond yields and geopolitical risks reduce investor appetite for yield-sensitive assets.
Rising Yields Narrow REIT Appeal
The selloff comes as global bond yields trend higher, driven by inflation concerns linked to the Middle East conflict.
Singapore’s 10-year government yield has risen about 20 basis points in March, reducing the relative attractiveness of REIT distributions.
As a result, yield spreads are tightening, making REITs less compelling compared to fixed-income alternatives.
Energy Shock and Growth Risks Weigh on Sentiment
The ongoing conflict is expected to:
- Disrupt global energy supply
- Push inflation higher
- Slow economic growth
These factors are weighing on REIT demand, particularly as the sector was only beginning to recover from the previous interest rate hiking cycle.
Defensive Large-Cap REITs Preferred
RHB recommends investors shift toward defensive, Singapore-centric large-cap REITs, which are better positioned to withstand volatility.
Preferred segments include:
- Office and industrial REITs
- Followed by retail and hospitality
REITs with higher overseas exposure may face greater risks due to currency and global economic uncertainties.
Fundamentals Remain Resilient
Despite near-term headwinds, sector fundamentals remain intact:
- Balance sheets are healthy with manageable leverage
- Operational performance is improving
- Many REITs have implemented cost management strategies, including hedging utility expenses
The sector’s average forward yield has risen to ~5.9%, reflecting price declines.
Growth Outlook Still Positive
Looking ahead, RHB expects distribution per unit (DPU) growth of ~3% annually over the next three years, supported by:
- Rental reversions
- Contributions from past acquisitions
This aligns partially with earlier expectations of a multi-year earnings recovery cycle, although timing may now be delayed.
Investor Takeaways
- S-REIT Index has fallen ~6% YTD, pressured by rising yields and geopolitical risks.
- Higher bond yields are compressing yield spreads, reducing REIT attractiveness.
- Investors are advised to focus on defensive large-cap, Singapore-centric REITs.
- Sector fundamentals remain stable with healthy balance sheets and improving operations.
- Long-term outlook still supports moderate DPU growth (~3% annually) despite near-term volatility.
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