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Investors told of high Reits dividends as SET stays on correction course

Jun 25. 2018
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INVESTMENT experts have urged investors to bypass market volatility through investment in real estate investment trusts (Reits) as a hedge as the SET continues its correction course.

The Stock Exchange of Thailand (SET) Index started this year at 1,753.71 points before hitting 1,838.96 points, the year’s highest so far. After that, the SET has continued its corrections, falling 12.70 points to 1,622.28 points yesterday. Its market capitalisation has decreased from a high of Bt18.08 trillion to Bt16.5 trillion. A number of investors, who do not hold energy stocks, have suffered losses. Energy stocks have outperformed the market and helped sustain the SET Index and Reits, which have also outperformed the market with high dividends.

Investing in Reits is making investment in assets in forms of buildings, hotels or warehouses. Presently, there are 60 Reits, whose strength lies in high dividends, in the stock market.

From the beginning of this year, prices of Reits have declined slightly, while dividend yields have increased. Average return of Reits stays in a range of 6-7 per cent. Given declines in some Reits' prices, their dividend yields have touched 8 per cent.

An anonymous trust manager expected Reits to have bright prospect as there are assets ready to raise capital in Thailand and investors will likely be attracted to Reits due to their higher return than bank deposits.

Aside from their regular return from asset rents, investors will earn more from higher prices of land where assets are situated. Typically, land prices continuously increase which will help add value to assets in the future.

Meanwhile, investors may have to consider types and quality of assets. For example, if assets are hotels, this type normally follows tourism festivals and are sensitive to political developments.

On the other front, the baht touched its weakest in seven months. Bank of Ayudhya's Global Markets noted that the baht has depreciated faster and sharper than estimated, while investors continued selling emerging-market assets as the Federal Reserve signaled that it will raise its benchmark rates higher than market expectations while international trade conflicts tend to pressure stock markets across the world as well as emerging-market currencies, including the baht. The baht is expected to move in a range of 32.80-33.20 per US dollar, compared to last week's close of 32.92 per US dollar, it said.

Excessive foreign exchange volatility may not give positive impacts to the business sector, while Thailand's Monetary Policy Committee said after its decision to maintain the policy rate that the Fed's rate hike and capital outflow have not yet affected the real economic sector, the research house said.


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