Singapore stocks could rally after Fed rate cut, say analysts

By most accounts, local market is undervalued and under-appreciated

- Ven Sreenivasan

Investors should pivot to real estate investment trusts (Reits) and other segments of the Singapore stock market that are likely to benefit from lower interest rates, with the Federal Reserve poised to cut rates for the first time in four years.

Global markets have been on a roller coaster ride since the US central bank began hiking rates in March 2022. As the Fed heads for its Sept 17-18 rate meeting, analysts reckon risk assets, especially stocks, will see a knee-jerk rally as the era of the highest Fed rates in two decades now at 5.25 per cent to 5.5 per cent comes to an end.

"Anecdotal evidence of stock performance in previous rate cut cycles shows that the Singapore stock market benefited at the start of the easing of the interest rate cycles during the 2007 and 2019 rate cuts," said CGS International in a strategy note on Sept 16.

The brokerage added: "We think investors should increase their exposure in S-Reits, which will likely benefit from the continued widening of yield spreads versus the 10-year government bond yield, with potential earnings upside risk in the medium term as funding cost trajectory reverses and inorganic growth opportunities pick up pace."