KUALA LUMPUR (Aug 1): Malaysian real estate investment trusts (REITs) are expected to track gains in the Asia-Pacific region as investors chase better yields amid a low interest rate environment.
AmInvestment Management Sdn Bhd chief investment officer Andrew Wong said a low interest rate environment against a still volatile global economic backdrop may result in a larger spread between regional benchmark interest rates and the dividend yields offered by REITs.
This attracts investors to put money in property trusts. “REIT is a kicker in the current low interest rate environment,” Wong told reporters here yesterday during a briefing on AmInvestment’s REIT portfolio in the region.
AmInvestment’s REIT portfolio, via the AmAsia Pacific REITs fund, comprises mainly Singapore and Australia REITs at about 30% each, while Malaysian entities make up around 7%, according to Wong.
He added that the fund is looking at countries where real estate demand exceeds supply and policymakers adopt more liberalised policies on REITs.“There must also be liquidity for us to exit the market easily,” Wong said, adding that AmInvestment hopes to pay out an average of 6% in annual dividends from its regional REIT portfolio.
| Wong: We are comfortable with Malaysian retail properties but neutral on the office market. |
His comments come at a time when Asian central banks have cut interest rates in recent months to boost domestic demand against weaker external trade prospects.
The People’s Bank of China last month reduced lending rates to 6% from 6.31%, while the deposit rates were slashed to 3% from 3.25%. The latest rate cut by China policymakers was the second in two months.
Meanwhile, the Reserve Bank of Australia in June reduced its benchmark interest rate by 25 basis points (bps) to 3.5% following a 50bps cut a month earlier.
The benchmark rates in these countries are in comparison with REIT dividend yields of 5% and 7% respectively in Singapore and Australia while Malaysian entities offer about 6%, said Wong.
In Malaysia, he said AmInvestment prefers retail REITs compared with office-based entities for now. Retail REITs of properties within prime locations offer growth prospects as the asset owners improve their properties and undertake more acquisitions, he added. “We are comfortable with Malaysian retail properties but neutral on the office market,” he said.
The “neutral” recommendation on the office market is due to an oversupply of office space within the prime commercial areas in the country. The situation has curbed office rental rates in the area, said Wong.
Malaysian retail REITs are CapitaMalls Malaysia Trust, Pavilion REIT, Sunway REIT (a mixture of retail and office properties), Hektar REIT and the upcoming IGB REIT.
This article appeared in The Edge Financial Daily on August 1, 2012.