Bulls And Bears

Reits reign as investors continue yen for yields

STI rises on sustained interest in higher returns offered by such stocks

Singaporean investors are not known for being romantics. But in yield stocks, they have found the love affair of a lifetime.

Income plays, notably real estate investment trusts (Reits), continue to be snapped up as Singapore stocks head for the finish this year.

The FTSE ST Reit Index hit a new high yesterday, and is at levels not seen since May 2013. That was before the "taper tantrum" began on worries around US tightening of its monetary policy.

On the second last day of the year's trading, the benchmark Straits Times Index (STI) rose 0.22 per cent or 7.43 points to end at 3,399.10 points. About 1.16 billion shares worth $664.4 million in total changed hands, and gainers outnumbered losers 265 to 136.

Even as market volumes are relatively thin, interest in yield stocks remained strong. This is reflective of the demand for steady streams of income even as the global economy appears to be improving.

Fibre network infrastructure provider Netlink NBN Trust shares went to 83.5 cents, up half a cent, the highest it managed this month.

The trust went public in July at 81 cents a share. Estimated distribution per unit of 4.64 cents for the year ending on March 31, 2019, imply a projected yield of about 5.6 per cent at current prices.

Investors also went for Reits like the usual blue chips such as Ascendas Reit and CapitaLand Mall Trust, which still offer, on average, yields from about 5 per cent to 6 per cent.

By contrast, yields on the benchmark 10-year Singapore Government bond are still hovering at around 2 per cent.

Having as large an income stream as possible makes sense, especially if asset values keep climbing and one thinks a correction is overdue.

However, by being essentially leveraged property plays, Reit values will not be spared from a broader economic downturn.

Fund manager Schroders said in a note yesterday that across major markets, only Japan can present a case for some value.

Among small caps, an active stock was Datapulse Technology, which was considering giving up its media storage manufacturing business and has experienced a sudden board change this month. The counter rose 12.5 per cent or 3.5 cents to 31.5 cents.

Earlier in the day, it responded to Singapore Exchange queries over its acquisition of haircare products maker Wayco Manufacturing. A requisition notice was also filed by the family of a co-founder seeking to oust four directors.

A version of this article appeared in the print edition of The Straits Times on December 29, 2017, with the headline 'Reits reign as investors continue yen for yields'. Print Edition | Subscribe