Singapore inflation to increase 3.2% in 2011

The S-REIT sector now trades at a normalized FY11F distribution yield of c6.1%, slightly below its historical mean of c6.5%.

DBS said that inflation is expected to inch higher to 3.2% in 2011 yet S-REITS offer a good hedge against inflation given that earnings growth can potentially outpace inflation.

We prefer S-REITs with the ability to deliver growing distributions organically while having the opportunity to acquire accretively. We continue to hold the view that hospitality and retail sectors offer a more robust outlook on the back of expected strong visitor arrivals in 2011. Office REITs are expected to see topline pressure from negative reversions in 2011 though the sector is on an uptrend.