Fed cuts interest rates as expected: Weekly Review with SIAS

What happened?

In this week's Weekly Market Review in partnership with Securities Investors Association Singapore (SIAS), we discuss key developments in the global equity market.

Watch the video to learn more about what we are looking out  for this week.

Weekly Market Review

1:30 - Macro Update

• Last week, global markets faced notable declines, with the S&P 500 down 2.6%, the Dow Jones dropping 4%, and the Nasdaq falling 1.4%.
• The Straits Times Index (STI) also lost 2%.
• The Federal Reserve concluded its final meeting of 2024, announcing a third rate cut for the year, lowering interest rates by 0.25%, bringing the total reduction to 1% since September.
• While these cuts were expected, markets reacted negatively due to revised projections for 2025, where the Fed now anticipates only two additional cuts, compared to prior expectations of four.
• Investor sentiment further cooled as CME FedWatch data showed expectations for just one rate cut in 2025, driving U.S. government bond yields above 4.5%, levels last seen in mid-2024.
• This tempered outlook contributed to corrections in both U.S. and regional markets.

6:30 Singapore market updates

STI Top performers:

• ST Engineering
• Singtel
• SIA
• Mapletree Pan Asia Commercial Trust
• SGX

STI worst performers:

• Jardine Matheson
• Hongkong Land
• Seatrium
• UOB
• Sembcorp Industries

8:38 - Cromwell European REIT

• Cromwell European REIT (CEREIT) emerged as one of the top-performing REITs in 2024, starting the year at $1.40 per share, peaking near $1.65, and recently settling at $1.56.
• Despite a 1.1% decline in gross revenue for the first nine months of 2024 compared to the prior year, performance improved in Q3, with a 0.6% year-over-year increase.
• Similarly, net property income, which had fallen by 0.8% over nine months due to divestments, rebounded in Q3 with a 7% year-over-year rise.
• However, distributable income declined by 8% in Q3 2024, driven by divestments and higher interest expenses.
• CEREIT maintains a robust balance sheet with 41% aggregate leverage and an interest coverage ratio of 3.6 times as of September 30, 2024, indicating financial stability.
• Its valuation, with a price-to-book ratio of 0.74x and a dividend yield of 10%, reflects a strong year-to-date price gain of over 15%, underscoring its appeal to investors.

Related Links:

• Cromwell European REIT share price history and share price target
• Cromwell European REIT dividend history and dividend forecasts

11:53 - Keppel DC REIT

• Keppel DC REIT has been a standout performer in 2024, starting the year at $1.90, reaching a high above $2.30, and settling at $2.12 as of last Friday.
• Its net property income showed improvement in Q3 with a 4.6% year-over-year increase, reversing earlier weakness in the first half.
• Finance costs stabilized, rising just 0.8% in Q3, allowing distributable income to grow compared to both the prior quarter and the same period last year.
• With an aggregate leverage of 39.7% and an interest coverage ratio of 5.1x as of September 30, 2024, Keppel DC REIT maintains a strong financial position.
• A significant driver of its performance was the acquisition of two data centers in Singapore, a transaction exceeding $1 billion SGD. Positioned in Asia’s leading data center hub, the acquisition is expected to be accretive to its distribution per unit and bolster long-term growth.
• Currently, Keppel DC REIT trades at a price-to-book ratio of 1.5x, above its historical average, with a dividend yield of 4.2%, below the historical average.

Related Links:

• Keppel DC REIT share price history and share price target
• Keppel DC REIT dividend history and dividend forecasts

14:43 - Elite UK REIT

• Unlike many REITs that faced corrections due to rising bond yields, Elite UK REIT's price remained resilient in November and December.
• The REIT grew its distribution per unit by 3.9% in the first nine months of 2024, supported by higher distributable income and tax savings.
• It has also proactively refinanced borrowings, reducing its average borrowing cost from 5.2% at the end of 2023 to 5% by October 2024.
• Additionally, strategic divestments of properties at prices above book valuations contributed to its improved financial position.
• As of October, the net gearing ratio was 43.6% and trending downward, with an interest coverage ratio of 3x, exceeding the minimum threshold.
• The REIT manager has prioritised proactive asset management and liquidity improvements, aiming to enhance capital efficiency and boost valuation, with these efforts aligning with long-term goals to create value for unitholders.

Related Links:

• Elite UK REIT share price history and share price target
• Elite UK REIT dividend history and dividend forecasts

18:09 - Technical Analysis

Dow Jones Technical Analysis

• The Dow Jones Index dropped by 4% following the Fed's announcement of a 0.25% interest rate cut, accompanied by projections of persistent inflation and fewer rate cuts in 2025.
• The MACD showed a smaller negative reading last Friday, indicating that the recent downside momentum might be subsiding.
• The RSI reached the lower bound of its range, signaling that the index could be in oversold territory.
• These readings suggest that the recent rebound could mark the start of a recovery, with the 50-day and 100-day moving averages potentially providing strong support for the index.

S&P 500 Technical Analysis

• For the S&P 500, technical indicators also suggest a potential stabilisation following recent declines. On Friday, the index rebounded by 63 points
• The MACD indicator showed a smaller negative reading on Friday, indicating that downside momentum is waning.
• Additionally, the RSI, while not breaching the oversold threshold of 30, showed an uptick, signaling a potential rebound.

Nasdaq Composite Technical Analysis

• The Nasdaq Composite Index saw a retracement on Wednesday after the FOMC decision but managed a positive rebound on Friday.
• The MACD still shows strong negative momentum with no signs of subsiding, suggesting bearish pressure remains.
• On the RSI, there was a slight rebound near the 50-point neutral mark, a level that has historically acted as support, as seen in early and mid-November.

STI Technical Analysis

• The Straits Times Index (STI) has been in a clear downtrend over the past week, mirroring the weakness in the US markets.
• The MACD remains negative, indicating persistent downside momentum.
• The RSI has dipped below the neutral 50-point mark, signaling potential for further downside risks.

What to look out for this week

• Tuesday, 24 Dec: Christmas Eve
• Wednesday, 25 Dec: Christmas Day
• Thursday, 26 Dec: Singapore Savings Bond application closing date

Check out the full list of Singapore stocks, REITs and ETFs with upcoming dividend payments with our dividend calendar.

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