What happened to the Scentre share price?
After being one of the go-to sectors for yield-hungry investors over the last few years, Australian Real Estate Investment Trusts (A-REITs) have come under pressure of late. And Scentre Group [ASX:SCG] has been no exception.
After the restructure of Westfield — in which Westfield Corporation became the holder of its international businesses, and Scentre’s Australian and New Zealand operations (after its merger with Westfield’s Retail Trust — Scentre’s share price enjoyed a solid run up, peaking in July this year.
Since then, though, it’s been a downhill run with its share price falling 25%.
Why did Scentre do this?
One of the big drivers of the popularity in A-REITs has been the demand for income by yield-hungry investors. As interest rates have fallen all over the world, Australia included, money has flowed into assets that generate a return.
But with the interest rate cycle of easing looking to be finished, this flow of money has reversed. Investors are now taking their money out of the highly-priced A-REIT sector and looking to redirect their investments back into bonds.
What now for Scentre?
The key factor that will drive the value of the A-REIT sector is interest rates. The market has fully priced in a 0.25% rise by the US Federal Reserve in December. But what the market will be watching even more closely is for any comments that come along with the announcement.
When interest rates move, they tend to go in a cycle. Meaning that one move can often be the precursor to a number of moves. What the market fears is that, if the Fed signals that they could move rates upwards quickly, a surge of money could flow out of equities and back into bonds.
Such a scenario would increase the flow of funds out of A-REITs, and put even more pressure on Scentre’s struggling share price.