SINGAPORE REAL ESTATE INVESTMENT TRUSTS (S-REITS) : ITS PERFORMANCE AND RELATIONSHIP TO OTHER ASSETS & ECONOMIC INDICATORS

Abstract

The Singapore Real Estate Investment Trust (S-REIT) market has witness exponential growth in recent years. Numerous analysts covering the S-REITs are all supportive of S-REITs performance. However, the recent market turmoil experienced caused by the United States subprime mortgage crisis has caused a great drop in investors' confidence in S-REITs. The S-REITs experienced a total drop of 19.4% in total unit prices in the second half of 2007. This dissertation is set out to analyze firstly the attractiveness of S-REITs in the risk-return perspective, and secondly to show the defensive qualities of S-REITs. Using risk-adjusted performance measures, the unit price and total return performance of S-REITs are analyzed in comparison among the S-REITs and also against other assets and competing REIT markets. The result showed S-REIT market is the best REIT market when compared against other major REIT markets such as Australia, Japan and United States. Although SREITs posted attractive risk-adjusted returns, it ranked poorly when compared against other alternative investment assets. The test on S-REITs defensive qualities however gives a mix result. It proved to be a good risk diversification asset in modern portfolio management but S-REITs have not shown to be of a good inflation hedging asset. In contrast, it showed to share a negative correlation with both actual and unexpected inflation. There is however an interesting finding obtained through the analysis of SREITs total return relationship with key economic indicators. It has been observed that the modeling of several key economic indicators is able to predict S-REITs total return.