Source: UOBKayhian
MARKET NEWS:
The FSSTI lost 1.6% to close at 2,835.97 as China stocks slumped on the first day of trading in 2016 after weak factory activity surveys soured hopes that the world’s second-largest economy will enter the new year on a better footing. A 5% rise or fall in the CSI300 would trigger China’s circuit breaker mechanism, which took effect on Monday. The broader market in Singapore saw 126 gainers and 273 losers, with total trading value at S$852.4m. US markets slumped on the first day of trading as investors dumped risky assets following a rout in Chinese shares overnight as well as heightened tensions between Iran and Saudi Arabia that sparked a global equity selloff. The S&P 500 retreated 1.5%, to 2,012.66, while the DJIA fell 1.6%, at 17,148.94. In economic news, the Institute for Supply Management said its manufacturing index slipped to 48.2% last month from 48.6% in November and US construction spending sank 0.4% in November to a seasonally adjusted annual rate of US$1.12t, the Commerce Department reported Monday.
United Engineers-Divestment Underway But Hurdles Remain
(UEM SP/NOT RATED/S$1.955)
United Engineers (UEM) is trading at 0.7x 2014A P/B with a dividend yield of 5%. Over the last two years, UEM has completed or proposed the disposal of more than S$750m in assets. Postdisposal of non-core assets…
Property- REITs: Interest rate impact revisited.
The impact of the interest rate hike on SREIT distributions is minimal in the near term (0.4-4.6% drop in DPU for a 100bp rise) due to the long debt maturity period and high proportion of fixed-rate debt. Even the punitive case of refinancing of total outstanding debt due outright (5.5- 12.3% drop in DPU for a 100bp rise) has been more than priced in by the market. We remain OVERWEIGHT, preferring deep value and diversified REITs, with ART, CCT and MLT as our top picks.
Valumetrics Comments: This is inline with our previous post on impact of interest rate on REIT’s distribution. The impact will be minimal posing a good opportunity to buy selectively now since REIT’s prices are fairly depressed.
Valumetrics.co 
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