While rising interest rates may have put the squeeze on yields from real estate investment trusts (reits) in the short term, it is unlikely to dampen global investor appetite for such vehicles in Asia, according to Standard & Poor's.
The agency forecasts interest rates in the United States will peak next summer, with the Federal Funds Rate climbing to 5 per cent from 4 per cent. It expects the rate will then stabilise until 2007.
'This year has a lot of ups and downs,' David Blitzer, managing director and chairman of S&P's index committee, said yesterday.
'The preference among investors is for yield and low volatility. In that environment, real estate equities such as reits have come into their own as an efficient way to gain returns.'
He said rate rises might not spoil Asian interest in reits because the region was attracting notice among international investors, adding that the 12 rate increases in the US since June last year had not significantly hurt investor interest for fixed-income products in the US.
Asia-Pacific reits - primarily in Japan, Australia and Singapore - have posted fast growth over the past decade. The number of listed reits had risen to 44 in the 10 years to last year and market capitalisation had soared 1,487 per cent at US$68.97 billion, S&P said.