Property stocks in S’pore fall while banks gain as higher-for-longer rates reshape market outlook

SINGAPORE – Property stocks in Singapore fell over the week as the US Federal Reserve signalled that rates may stay higher for longer with inflation risks rising amid the Middle East conflict.

The US central bank maintained interest rates at 3.5 per cent to 3.75 per cent on March 18, the second consecutive hold, while noting elevated inflation risks due to geopolitical conflict.

City Developments Limited (CDL) shares fell 6.8 per cent over the week to $8.42 on March 20, while peer UOL declined 3.1 per cent to $9.98, as investors reacted to expectations that interest rates will stay higher for longer – raising borrowing costs for developers and potentially dampening demand for property.

J.P. Morgan analysts Mervin Song and Terence Khi downgraded the two property giants to “neutral” from “overweight” on March 16, citing a tougher macroeconomic environment, especially with the Middle East conflict.

The analysts said tensions involving Iran could make CDL’s asset monetisation efforts more challenging even as its earnings are expected to recover, supported by record residential sales in 2025, a resilient housing market and relatively low borrowing costs, with the three-month Singapore Overnight Rate Average at around 1.1 per cent.

They cut their target prices for CDL to $8.70, and UOL to $9.55.

Other stocks in the sector also closed lower. Hongkong Land slid 9 per cent to US$8.02, CapitaLand Investment fell 1.8 per cent to $2.78, and Frasers Property was down 1 per cent to 97.5 cents.

In contrast, shares of Singapore’s three major banks – DBS Bank, OCBC Bank and UOB – reacted positively to the news of the Fed delaying rate cuts.

Net interest margins (NIMs) – a key measure of bank profitability – are closely tied to global interest rates, with higher-for-longer rates generally supporting stronger bank earnings.

DBS shares rose 3.8 per cent to end the week at $57.40, from March 13’s closing price of $55.31. OCBC gained 3.6 per cent to $21.37, while UOB increased 2.8 per cent to $37.18.

The Straits Times Index – which the banks form the largest constituents of – touched 5,000 for the first time in three weeks on March 18. The index closed 2.2 per cent higher at 4,948.87 on March 20.

Gold prices slide

Gold prices continued to retreat as geopolitical conflict lifted energy prices and dampened expectations for interest rate cuts.

Bullion traded near US$4,685 an ounce on March 20, down about 7 per cent this week.

Attacks on energy infrastructure and disruptions in the Middle East have pushed oil prices sharply higher. Higher energy prices raise costs across the economy, which pushes up prices for goods and services – leading investors to expect higher inflation.

Gold does not pay interest, so when rates stay higher, it becomes less attractive compared with bonds or cash.

Shares of CNMC Goldmine, a Malaysia-based gold miner listed on the Singapore Exchange, also fell. They were down by 11.1 per cent this week, closing March 20 at $1.52.

Energy stocks rally

Sembcorp Industries, a major importer and retailer of natural gas in Singapore, rose 6.6 per cent to $6.15 on March 20.

CGS International analysts Lim Siew Khee and Meghana Kande added Sembcorp Industries to their top Singapore picks and reiterated a target price of $7.68 on the stock. The analysts on March 17 cited the company’s relatively cheap valuation and its defensive qualities against volatility in global gas prices as reasons to invest.

Union Gas soared 33.3 per cent to close at 50 cents on March 20. Long queues formed at its Cnergy petrol stations in Singapore this week after drivers caught wind of Cnergy’s lower petrol and diesel prices, even as competitors raised theirs in tandem with surging oil prices.

Speaking to The Straits Times, Union Gas chief executive Teo Hark Piang noted that the cost of petrol and diesel have risen “significantly” since the war in Iran started on Feb 28, forcing Cnergy to raise its pump prices four times since then.

He added that the company accepts a smaller profit margin to keep Cnergy’s prices lower than those at other fuel station operators, but stops short of doing so at a loss.

Shares of Keppel, a global asset manager and operator with a focus on sustainability-related solutions, rose 2.6 per cent to $12.38.

China Aviation Oil, marine stocks rise

China Aviation Oil, the largest purchaser of jet fuel in the Asia-Pacific region, leapt 11.8 per cent over the week to close at $2.28.

This came after DBS raised its target price on the stock to $2.50 on March 17 from $1.75 while maintaining a “buy” call, as the jet fuel trader reported better-than-expected earnings for the 2025 financial year.

Offshore and marine stocks rose as Middle East tensions and higher oil prices typically boost offshore and shipping activity.

Brent crude, the international standard, briefly rose above US$119 a barrel on March 20, up from roughly US$70 before the war in Iran began.

Nam Cheong jumped 18.7 per cent to $1.59 for the week, after RHB initiated coverage with a “buy” call and a $2.05 target price on March 17, citing the offshore marine group’s long-term charter portfolio and a young fleet of 36 vessels.

Marco Polo Marine gained 1.4 per cent to 14.9 cents from last week’s close of 14.7 cents.

Other market movers

Suntec Real Estate Investment Trust (Suntec REIT) rose 10.3 per cent over the week to $1.50, following news that its new sponsor, Tang Organization, is planning to undertake a comprehensive strategic review of the trust’s portfolio.

The review, which aims to “strengthen portfolio performance and enhance capital efficiency”, will also explore “disciplined approaches to asset optimisation and recycling”.

In the same week, Hongkong Land announced its acquisition of a 10.8 per cent stake from real asset manager ESR Group in Suntec REIT for $541 million.

Hongkong Land in a March 19 statement said the acquisition will enable the group to deploy recently recycled capital into prime, income-producing commercial assets in Singapore.

RHB analysts noted that the transaction is a positive one and maintained their “buy” rating on Suntec REIT with a target price of $1.67.

“(This is because it) clears the overhang of ESR’s stake and brings in a new, strategic shareholder who has deep experience in the prime commercial market, and is active in value unlocking of assets,” they said.

What to expect next week

Keep a close watch on DBS, OCBC and UOB next week, as a higher-for-longer interest rate environment could support their NIMs and drive potential stock movements.

Investors may also keep an eye on Singapore REITs as a higher-for-longer interest rate environment typically weighs on the sector by raising borrowing costs.

Watch for ringgit movement as the Malaysian currency climbed to its strongest level this week against the Singapore dollar since 2021, supported by higher energy prices that benefit the net energy exporter, as well as artificial intelligence optimism.

Being a net energy exporter means Malaysia produces and exports more energy products – primarily oil, gas and liquefied natural gas – than it imports.

The ringgit strengthened to 3.05 against the Singapore dollar in intra-day trading on March 19 before weakening to 3.08 on March 20.