ARE SINGAPORE REITS, PARTICULARLY INDUSTRIAL AND RETAIL REITS, BETTER DEFENSIVE INVESTMENT ASSETS IN THE AFTERMATH OF THE SUB-PRIME CRISIS?

Abstract

Empirical evidence has generally concurred that Real Estate Investment Trusts (REITs) defensiveness erodes in declining market. If applying this behavior to Singapore Real Estate Investment Trusts (SREITs) context, SREITs should make vulnerable asset during financial market turmoil. Yet, several analysts have claimed to the contrary. They alleged that SREITs, particularly Industrial and Retail REITs, will make good defensive asset in this reigning Sub-Prime Crisis, hence contradicting the empirical conclusion. This dissertation hence attempts to address the discrepancy. It has found that SREITs indeed exhibit stronger defensiveness in the aftermath of the Sub-Prime Crisis, endorsing the analysts’ claims. Also, Industrial and Retail related SREITs have similarly shown greater defensiveness compared to SREITs of other sector. What would be the possible factors that attribute to the observed SREITs defensiveness behavior observed? Further analysis suggests that it could be due to Volatility Effect from market and REITs Asset Growth- REITs with lower exposure to Volatility Effect from market or lower Asset Growth are likely to exhibit stronger defensiveness during financial turmoil.