Credit Suisse and DBS declare Singapore buys earnings for a return

Singapore-listed real estate investment trusts may not appreciate their prices much considering their rise of about 20% this year – but strategists said they remain a buyout, because interest rates would probably remain low.

Real estate investment trusts, or REITs, are companies that manage a portfolio of properties such as shopping centers, hotels and offices. Revenues generated by these real estate badets, after accounting for operating expenses, are distributed as dividends to shareholders.

Investors generally find REITs attractive for distributing their dividends and potential for capital appreciation, as well as for diversification into a portfolio of stocks, bonds and cash.

The REITs listed on the Singapore Stock Exchange, more commonly known as S-REIT, have been highly regarded by institutional investors. In the first half of 2019, the S-REITs attracted a net inflow of 396.3 million Singaporean dollars ($ 291.85 million) from institutional investors, the stock market said in a report.

This investor interest pushed S-REIT prices up nearly 20% this year, up 9% from the rise in the Singapore equity benchmark, the Straits Times Index, and roughly matched to the gains of the broader MSCI World REITs index.

"At this level, there is very little chance of capital appreciation," said Suresh Tantia, chief investment strategist at Credit Suisse, on Thursday at a briefing on the prospects for the future. 39, investment of the bank.

But for income-oriented investors, the S-REIT sector "still offers you a 5% return, especially when bond yields are not going to increase significantly from now on," he added.

The potential for a gradual increase in bond yields has mostly declined as the world's major central banks are expected to lower their interest rates. Expectations of lower interest rates prompted investors to buy previously issued bonds with higher yields, which led to higher prices.

Not everyone agrees that investors should continue to pile up in S-REITs now that their stock prices have risen. Singaporean bank OCBC, for its part, said Thursday that it has withdrawn several S-REITs from its buying list because they are "close or close to our full badessments".

The yields offered by the S-REIT fell from around 6% at the beginning of the year to 5% today, strategists said. But that's still better than the near-zero or negative bond market options, said Hou Wey Fook, chief investment officer of Singaporean bank DBS.

"Given the fact that interest rates are close to zero, 5% is a very attractive yield, so we think the Singapore REITs remain an badignment, a purchase," Hou told CNBC this month. this, as part of the show "Street Signs". He added that there were not many REIT markets in the world that offer returns of 5% and more.

DBS has maintained a "buy" recommendation on several REITs, including Ascendas REIT, CapitaLand Retail China Trust and Frasers Centrepoint Trust.