Tuesday, 26 Jan 2021
BUSINESS
14/01/2021 03:58 PM

KUALA LUMPUR, Jan 14  -- Real estate investment trusts (REITs) in Asia-Pacific are expected to remain attractive in 2021, with the yield anticipated to touch about 5.1 per cent compared with a 2.1 per cent yield for Asian equities.

Manulife Investment Management portfolio manager Hui Min Ng said the payout was expected to remain stable over the long term, largely due to the strength of the asset class and improved economic conditions. 

The forecast of attractive yields is based on the improving macroeconomic backdrop and the base scenario that key markets like Singapore, Hong Kong, and Australia should not be entering into national lockdowns given policy learnings and experiences. 

“The positive newsbytes on vaccine successes could restore confidence in consumer and corporate spending in 2021.

“While retail landlords should enjoy recovery in cashflows given the low base in 2020 (high rental reliefs) and industrial REITs remain stable with growth boosted from accretive acquisitions,” she said in a note today.

She said moving into 2021, Manulife Investment envisaged the macroeconomic backdrop should gradually improve across the region, with significant dispersion in economic growth.

“Despite the economic rebound, we expect that the low-interest-rate environment should remain as a strong tailwind for the asset class. The low cost of borrowing continues to underpin healthy demand in trophy assets across Asia,” she added.

Ng said retail landlords should enjoy recovery in cashflows given the low base in 2020 (high rental reliefs) and industrial REITs remained stable with growth boosted from accretive acquisitions.

In the company’s view, Ng said the main attraction of Asia-Pacific REITs as an asset class was the stable, sustainable payout of dividends to investors. 

While this assumption was challenged in early 2020 due to the pandemic, she said the response by governments and central banks had helped to stabilise the real estate sector. 

“Moving forward, we believe an improving economic outlook and continued low-interest rates should be beneficial for the asset class,” she added.

To recap, Ng said over the past 10 years, Asia-Pacific REITs had provided a 6.8 per cent annualised return on average, and about five per cent of the total return came from dividend payouts.

To put this dividend yield in perspective, she said Asia ex-Japan equity markets offered, on average, a 5.4 per cent total return, with only 2.4 per cent coming from dividends over the same time period.

-- BERNAMA

 

 

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