| | | |  | | |
| | | | | | | Singapore REITs could see more US property funds park their money in them, some analysts say.
This is because US treasury bonds could lose their appeal and yield spreads of Singapore REITs are more attractive than their US counterparts.
Singapore-listed companies are appearing on the radar screens of more global fund managers and of particular interest is the relatively young Singapore REIT market, which only made its debut in 2001.
During a seminar on the sidelines of the IMF World Bank meetings, investment guru Marc Faber held up Singapore REITs as an example.
He said: "I also think Singapore has some world class companies, very well run. You could buy REITS that have a yield of more than 5 percent. I'd rather be in REITS in Singapore in an inflationary environment that can increase rentals, than in a 30-year US government bond that will be very vulnerable to an inflationary environment."
Some analysts tell Channel NewsAsia they are wary about rising interest rates negatively impacting US treasuries.
And the yields of US REITs are no longer attractive.
David Lum, Regional Head, Daiwa Institute of Research, said: "If you look at the yield spread in the US, it is actually negative, that is the government bonds are giving a higher yield than the average REIT in the US. In contrast, the Singapore REIT is the opposite. You get a two percent cushion above the Singapore government bonds, if you own a typical Singapore REIT."
Not only have US REIT yields been significantly compressed, the value of their underlying properties could also be impacted.
Total returns will be further hit in the US where most analysts forecast a slowdown in the property market.
In contrast, not only are yield spreads of Singapore REITs attractive at 200 basis points above long bonds, asset prices in most sectors are expected to improve in the medium term. - CNA/ch |
