India REITs promise yield and growth

For large caps, the SET50 index was trading at 17.7 times price to earnings (PE) vs 16.8 times for the Dow Jones Industrial Average Index. One might argue that the stronger earnings per share (EPS) growth of the Thai-listed companies will help bring the current year PE down. This could probably be true if global oil prices stay at a high level, as most of the market earnings growth is expected to come from the heavily weighted energy sector. It’s more like a commodity play. Since the latter half of last year, the SET Index was mostly trading below the 1,400 psychological level than above it. 

India might be a choice for investors who are keen in diversifying their portfolio. DBS Bank expects India’s gross domestic product to grow at 7.6 per cent in 2016, more than double Thailand’s GDP growth of 3.4 per cent. 

In 2017, DBS Bank’s economist expects India’s economic growth to accelerate to 7.8 per cent, compared to 3.7 per cent for Thailand. Besides, the recent build-up in foreign reserves for India will help stifle India’s vulnerability to external shocks and cover the gradual rise in external debt, according to DBS Bank’s economic report on India.

The two India real estate investment trusts (REITs) listed on the Singapore exchange offer both yield and growth. Ascendas India Trust (AIT) is a commercial REIT that rents out offices and focuses on fast-

 growing IT businesses in India. Most of its clients are multinational corporations. 

The distribution yield of AIT is expected to be 5.7 per cent in 2016 and 6.2 per cent in 2017. Religare Health Trust (RHT) is a business REIT that invests in healthcare services facilities and hospitals in India. We expect RHT to deliver prospective distribution yields of 7.7 per cent in 2016 and 8.4 per cent in 2017.