THE HIKE THAT SPLIT SINGAPORE IN HALF
On 16 September (US time), the Federal Reserve raised interest rates for the first time in three years, lifting the range to 3.75% to 4.00%. The vote was unanimous at 12 to 0, and Singapore investors woke up on 17 September to a market that suddenly felt different.
The strange part is what happened next. The STI is up more than 20% this year, while S-REITs are down about 8%. One rate hike, and two completely different report cards depending on what you own.
The STI hit a record close of 5,801.96 on 4 September, slipped, then bounced 0.97% to 5,711.12 in the week ending 25 September. Underneath that calm number, the market is quietly sorting winners from losers.
WHY THE BANKS ARE SMILING
A bank earns money on the gap between what it charges borrowers and what it pays depositors. When rates fell over the past two years, that gap got squeezed. Now that the Fed is hiking, Singapore rates such as SORA could drift higher, and loan yields could follow.
DBS and OCBC are already trading near all-time highs, while UOB has lagged behind. Together the three banks make up about half of the STI, which is why the index looks so strong even when other parts of the market are struggling.
Strong share prices do not mean the story is free of risk. Bank dividend yields sit at roughly 4% to 5%, which is lower than what many REITs offer, and a lot of good news may already be in the price.
FREE LIVE EVENT!
FREE event, live webinar! Come and join the preview to see who’s been behind this success, click the link below! Limited seats! Event starts September 9th.
(Please be advised that Mandarin will be the primary language used during much of this event).
WHY REITS FEEL THE PAIN
A REIT borrows heavily to buy malls, offices and warehouses. When rates rise, refinancing that debt costs more, and that comes straight out of the distributions investors receive.
There is a second problem. The 6-month Singapore T-bill hit 1.70% at the 10 September auction, and reports suggest it climbed higher, to around 1.92%, at the 24 September auction. When a risk-free T-bill pays more, a 5% REIT yield looks a lot less generous, so investors demand a lower price.
That does not make every REIT a bad idea. Analysts tend to look at leverage, how much debt is at fixed rates, and the strength of the sponsor. Some point to names such as CICT, MIT and CLAR as better placed, though that is one view and not a guarantee.
WHY REITS FEEL THE PAINWHY AMERICA HIKED WHEN EVERYONE HOPED FOR RELIEF
Inflation is the reason. Core PCE inflation has run above 3% every month this year, and the Fed chair, Kevin Warsh, put August headline PCE near 3.6%. Oil has not helped, with Brent around $106 a barrel as the Iran conflict drags on.
Bond markets took it hard. The 10-year Treasury yield briefly reached 5.23%, its highest since June 2007. On the day of the hike itself, the Dow dropped more than 600 points in the final hour of trading.
Warsh has also said he will not give the market hints about future moves. That means every meeting can be a surprise, and J.P. Morgan expects another quarter-point hike in December.
WHAT THIS MEANS FOR YOUR OWN MONEY
If you have a floating-rate mortgage, your monthly payment is likely heading up. If you keep cash in a savings account, T-bills and cash management products may now pay you more than they did a month ago.
The bigger risk for beginners is emotion. Selling a REIT in a panic after a rate scare, or buying bank stocks at all-time highs because they look unstoppable, are both classic mistakes. Ask what you own and why you own it before you react to a headline.
Rate cycles turn slowly, and the investors who do well are usually the ones who understood their holdings before the news hit.
With 20 years of investment expertise, Caleb Gan is a seasoned professional in stock trading. The hard work and dedication were recognized when his partner and him were featured on Singapore TV Channel 9's MoneyWeek, a prominent financial program. He's also had the privilege to share insights on radio stations like 93.8Live, Capital 95.8FM, and 96.3FM through live interviews about stock market investments. Beyond that, he's also the co-founder of NDU System, where he continues to help others navigate the world of trading.
If you’re serious about improving your results, the difference usually isn’t effort—it’s guidance and structure. Opening an account with us isn’t just about access, it’s about stepping into a system that helps you see the market with more clarity, avoid common mistakes, and make more confident decisions. Instead of guessing what to buy or when to act, you’ll start understanding why things move, and how to position yourself ahead of it. If you’ve been feeling stuck, inconsistent, or unsure… this is where that changes.
Open an account now ➜ https://www.calebgan.com/open-account
Until next time,
Subscribe for Daily News