SREITS – DBSV

Price action indicates AREIT may show more resilience compared other S-REITs

US stocks ended lower and treasuries yield inched higher as concerns about QE3 continued to weigh. Investors will closely monitor the FED statement at the outcome of the FOMC meeting next Wednesday night. With triple witching

(expiration of stock index futures, stock index options & stock options) next Friday, US equity indices will be rocky, either way, over the next one week. China and HK markets re-open today.

S-REITs have been one of the worst affected in recent weeks as investors sold down yield names on concerns about QE drawdown. Recall that QE3 was announced in Sept last year. A check back on the price action shows that in line with STI’s

U-turn up, many S-REITs started to further their climb from last November as they benefited from the liquidity inflows.

S-REITs that have declined back to their respective Nov12 lows in the current correction would have effectively reversed and wiped out all the positive price action from the liquidity inflow prior to their decline. Chances are these would be

more resilient going forward compared to those that have yet to decline to their respective Nov12 levels. One SREIT that has fallen back to Nov12 level is AREIT. The stock’s Nov12 low is at $2.28. The stock undershoot that level yesterday to $2.22 but in an indication of bargain hunting, returned back to $2.30 by day’s end. Our analyst upgraded the stock to Buy earlier this week. We expect shares of AREIT to show more resilience going forward compared to other S-REITs. One

example of a S-REIT that has yet to fall to its Nov 12 low level, and thus more vulnerable to weakness, is Cambridge. The stock’s Nov12 month low was around $0.64.