See what's spooking foreigners from investing in SREITs

SGD vs USD deprecation is one.

Aside from the currency exchange rate dip that is convincing foreign investors to let go of SREITs, Barclays Research also noted that the markets continue to be spooked by possible “tapering off” of QE3.

It noted how the FSTREI Index, a proxy for SREITs, has fallen c15% from a 52-week high of 890 pts on 15 May.

"On average, forward yields have expanded by another 30bps since our last update at end-May to 6.3-6.5%, with a yield spread of 4.4-4.6%. The Singapore 10Y Government Bond yields continue to track US ones, having risen to 1.94% from 1.47% on 15 May," it said.

Barclays also cited data which showed stocks do not appear to correlate just to bond yields and exchange rates, but growth as well.

"We believe SREITs' valuations are looking attractive at 50bps above normalised average yield spread. We are mindful this is not a recessionary scenario but a growth story should interest rates indeed rise," it said.

The research firm prefers higher beta REITs which are also less constrained by Singapore’s ongoing economic restructuring conditions – in the office REITs space, including Keppel REIT (KASA.SI, OW, TP: S$1.70) (6.0% FY14E yield) and CapitaCommercial Trust (CACT.SI, OW, TP: S$1.87) (5.5%).

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