Real estate investment trusts in Singapore will remain attractive to investors amid market volatility, according to DBS Group Holdings Ltd.
REITs “offer resiliency given their attractive and growing distribution yields” as investors are turning defensive, Eng-Kwok Seat Moey, group head of capital markets at DBS, said in an interview.
Interest rates have climbed globally, pressuring returns for some investments. While the opportunity cost of investing in REITs in the city-state has increased, they will come on strongly thanks to their steadily increasing dividends, she added.
Heightened volatility makes it challenging to introduce new initial public offerings as investors have become more selective, she said, adding that deals will have to come at “more market-friendly valuations” and be supported by a larger percentage of cornerstone investors.
DBS was among the coordinators for Digital Core REIT Management Pte’s US$647 million ($871.7 million) Singapore listing and Daiwa House Logistics Trust’s US$145 million IPO, both of which took place in November 2021.
Elsewhere in Southeast Asia, first-time share sales in Thailand will stand out for another year, after proving relatively resilient amid a global slowdown in capital raising.
See also: CICT's manager proposes to acquire ION Orchard at $1.85 billion, subject to EGM
Thai IPO volumes reached nearly US$4 billion so far this year, down just 3.6% from the same period in 2021, and accounting for more than half of the US$7.7 billion raised in Southeast Asia, data compiled by Bloomberg show. By contrast, global IPO volumes have fallen nearly 70% year on year, due to factors including increasing interest rates and geopolitical tensions.
“While most of the ASEAN markets faced a slowdown in ECM deal activity, as with most markets globally, Thailand’s deal volume has been outperforming other countries,” Eng-Kwok said. “We expect to see this trend to continue going into the new year, as there are still several sizable IPOs waiting for the right window to launch there.”
Big C Supercenter Pcl, which runs supermarkets and convenience stores in Southeast Asia, and CJ Express Group Co., a retail chain founded by energy drink tycoon Sathien Setthasit, are among companies considering going public in Thailand next year in offerings that could each raise more than US$500 million respectively, Bloomberg News has reported.
See also: CICT's manager proposes to acquire ION Orchard at $1.85 billion, subject to EGM
More predictions from Eng-Kwok:
- China’s reopening, green energy and electric vehicles and financial stocks could feature well next year
- Aviation, food and beverage, hospitality and recreation are also likely to benefit from strong tourism comeback and recovering domestic consumption
- After starting a joint-venture securities firm in China last June, DBS has completed a handful of onshore transactions and sees more to come
