To The Moon

The $FTSE250 ETF(MIDD.UK)$ ST REIT Index(ES3.SG)$ has been on a quiet tear, with many SREITs surging to 52-week highs. This rally is happening before the best news even hits, but this Q3 earnings season is giving us the first taste of the massive catalyst ahead.

So far, the earnings reports (from about 6 SREITs) have been strong, but the real story isn't just stable occupancy. It's the first glimpse of plunging finance costs.

This is the inflection point. The market is finally rewarding "boring" stability, forcing investors to ask a critical question: Is it time to rotate from "Explosive Growth" to "Stable Yield"?

This post breaks down the powerful "one-two punch" from the latest earnings, why rate cuts are rocket fuel for the sector, and which horse to back for 2026.

WHAT: The Earnings Show the Catalyst is Here

The theme for Q3 earnings is resilience and relief. While rental reversions are solid, the "wow" factor is coming from the expense line.

• My Bullish Pick: Suntec's DPU Jump

  I am most bullish on the results from $Suntec REIT(T82U.SG)$. They just posted a 12.5% year-over-year jump in Distribution Per Unit (DPU).

  This wasn't just from strong performance at Suntec City Mall; a key driver was lower financing costs. This is the first concrete proof of the new reality: the cost of debt is no longer a headwind, it's becoming a tailwind.

• The Proof is in the Cost of Debt

  This isn't an isolated case. $OUE REIT(TS0U.SG)$ also just reported a massive 19.7% plunge in their finance costs for the quarter.

  This is the "What" that matters. For the last two years, rising rates crushed SREIT margins. We are now seeing the first evidence of this trend reversing, and it flows directly to the bottom line and into unitholders' pockets.

WHY: Rate Cuts are Rocket Fuel for SREITs

SREITs are hitting 52-week highs because the market is front-running the Monetary Authority of Singapore (MAS) and the Fed. Everyone expects rate cuts in 2026, and this has a powerful two-part effect.

• Mechanism 1: The Refinancing Relief

  This is the simple part. SREITs use a lot of debt. When rates fall, their interest payments go down.

  As Suntec and OUE just proved, this isn't theoretical. Every loan they refinance from now on will likely be at a lower rate, which means more cash is left over for DPU. This provides a clear, mechanical path for DPU growth, even if rents stay flat.

• Mechanism 2: The Irresistible Yield Spread

  This is the valuation part. SREITs are valued against "risk-free" bonds.

  A year ago, you could get 3.5% on a Singapore 10-Year bond, making a 5.5% SREIT yield look "okay." Today, the 10-year bond yield has collapsed to below 2.0%.

  Suddenly, that 5.5% average SREIT yield doesn't just look "okay"—it looks massive. This "yield spread" is now so wide that large institutions (like pension funds) are being forced to sell low-yielding bonds and buy SREITs to get their target return. This is what's driving prices up.

HOW: The Great Portfolio Debate

This rally brings us to the most important question for your portfolio.

• The Case for "Stable Yield" (SREITs)

  A bet on SREITs is no longer just a "boring" income play. It's a total return bet. You are betting on:

1. A high, stable DPU (5-6% yield).

2. Capital Appreciation (rising prices) as rate cuts force a re-valuation of that yield.

This is the perfect play for a "soft landing" or a stagflationary environment where predictable cash flow is king.

• The Case for "Explosive Growth" (e.g., Tech)

  A bet on $NASDAQ 100(QQQ)$ or stocks like $NVIDIA(NVDA)$ is a bet on pure earnings growth. You are accepting 0.5% (or zero) yield in exchange for the potential of 30% earnings growth driven by AI and innovation.

  This play needs a strong economy and continued massive capital investment to work. It is a pure capital gains play.

Here is how the two strategies stack up:

My Take: The "Stable" Trade is the New Growth Play

For the past two years, "Explosive Growth" was the only game in town. But the macro environment has completely shifted.

I believe the SREIT rally is just getting started. The Q3 earnings from Suntec and OUE are the "shot across the bow," proving that the financial relief is no longer a theory; it's a fact.

While I’m still holding my core tech positions, I am actively using this period to build my allocation to high-quality SREITs. The "Stable Yield" trade, powered by the tailwind of falling rates, may offer a better total return over the next 18 months than the "Explosive Growth" trade that everyone is already crowded into.

I am particularly bullish on diversified, high-quality REITs like $Suntec REIT(T82U.SG)$ that are proving they can cut costs, and high-demand sectors like Data Centers ($Keppel DC REIT(AJBU.SG)$) that offer a blend of both yield and growth.

$FTSE ST REIT Index(ES3.SG)$ $Mapletree Pan Asia Commercial Trust(N2IU.SG)$ $CapitaLand Ascendas REIT(A17U.SG)$ $NVIDIA( $NVIDIA(NVDA)$ )$ $Apple( $Apple(AAPL)$ )$ $NASDAQ 100( $Invesco QQQ(QQQ)$ )$

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📝 Disclaimer: This post is for informational purposes only and does not constitute financial advice. Always conduct your own research before making investment decisions.

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