The impact of the UK’s decision to leave the European Union has created a ripple effect on global markets, negatively affecting mostly those on the western hemisphere.
The situation caused investors to be concerned about the long-term effects of Brexit, leading them to find alternative investment havens.
Michael Wu, a Morningstar Inc. analyst in Hong Kong, suggested that Singaporean REITs may be a viable alternative for investors seeking safe yields amid the turmoil elicited by the Brexit vote, Bloomberg News reported.
Since the UK’s vote to be excluded from the EU, analysts have pegged Asia as a ‘safe haven’ for good investment returns, partly due to the region appearing to be somewhat unscathed from the crisis. According to Bloomberg figures, S-REITs are estimated to provide a 7.3% yield for the next 12 months, the largest among developed markets worldwide.
However, that is not to say the sector remains impervious to market shocks and other factors. S-REITs may have the biggest estimated figure for investment returns, but that would be more difficult to maintain due to potentially pressured rents in the city-state amid its slowing growth, according to Wu.
Rushing Towards Safety
As global investors clamour to find a safety net and protect their investments, analysts expect S-REITs to benefit from the current market situation, The Business Times reported. Several investors even begin to check stock investment seminars to educate themselves on the changing market.
Their belief hinges on a possible delay of an interest rate hike in the US by the Federal Reserve to December 2016 from the previous expectation in September of the same year.
In other words, Singapore will continue to enjoy lower interest for its bond rates. For instance, its 10-year government notes usually follow the mandated rates of the US Treasuries. A continually lower rate could be a positive for S-REITs, particularly those that are rate-sensitive.