Live Markets: Real estate: only a tactical rally on the horizon?

Safestore Holdings

21/03/2024 11:02

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    REAL ESTATE: ONLY A TACTICAL RALLY ON THE HORIZON? 
    Real estate  .SX86P  is among the leading gainers in Europe
this morning, as traders take comfort from a wave of dovish
central bank decisions. And with the ECB and BoE set to start
cutting rates in a few months' time, more gains may be in store.
    Yet, for Morgan Stanley, it's important for investors to
separate the wheat from the chaff in this rate-sensitive sector.
    The U.S. bank expects UK and euro zone rate cuts in May and
June respectively to trigger a "tactical rally" across the
industry, leading to potential meaningful outperformance from
high beta continental stocks.
    But for "low property yield/high leverage names" this could
be the "last hurrah", while prospects for well-capitalised
companies look much better, it argues. 
    "Low stock valuation dispersion provides confidence in our
positioning to stocks that have solid capital structures
allowing them to play offence, and that are exposed to
sub-sectors that see strong tenant demand," says MS.
    "Overweights are skewed regionally to the UK (where we see
on average more than 20% upside potential, vs downside risk in
continental Europe), with logistics (Segro, CTP), student
accommodation (Unite), and now also storage (Safestore)
preferred sub-sectors," it adds.
    
    (Danilo Masoni)
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