Real estate investment trusts (REITs) look poised to stage a comeback after the US Federal Reserve halts interest rate hikes, as seen after two previous tightening cycles, analysts at UOB Asset Management Taiwan said on Tuesday.
REITs have regained the attention of global investors, as monetary tightening draws to an end, UOB Asset’s Asia-Pacific stock analyst Low Soo-Fang (劉蘇芳) told a media briefing in Taipei, adding that Singapore’s REITs specifically have displayed a price trajectory at odds with that of US 10-year Treasuries.
That bodes well for REITs, as the uptrend for US 10-year Treasuries would soon be over, after the Fed last month indicated that it would likely raise interest rates one more time and stay put thereafter.
Photo: Hsu Yi-ping, Taipei Times
However, bonds and stocks remain susceptible to volatility, warranting a diversified portfolio that includes Singapore’s REITs, which have outperformed peers elsewhere, Low said.
Prices for Singapore’s REITs last year declined 9.78 percent — lower than a 24.75 percent retreat in global REITs and a 19.17 percent fall in Asia-Pacific REITs, Low said.
Furthermore, Singapore’s REITs have advanced 3.88 percent as of March this year, faster than a 0.74 percent gain in Hong Kong’s REITs and a 0.79 percent drop in Australia’s REITs, UOB Asset Taiwan data showed.
UOBAM Taiwan chief investment officer Samuel Yang (楊斯淵) said that prices for Singapore’s REITs spiked 65 percent and 19 percent in 2006 and 2018 respectively, within one year after the Fed paused interest rate hikes.
That is because Singapore’s REITs enjoy yields higher than 5.5 percent, led by office buildings, retail properties and industrial complexes, Yang said.
Hospitality properties could see a rapid recovery following China’s opening, as Chinese travelers account for 20 percent of the city-state’s’s foreign tourist arrivals, Low said.
To take advantage of this trend, UBO Asset Management Taiwan is to launch the first onshore fund targeting 42 Singaporean REITs with an overall value equivalent to US$78.86 billion, Yang said.
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