More foreign Reits likely to list in Singapore in 2019 as investors seek havens: Credit Suisse

Singapore

SINGAPORE'S equity market could see more Reit listings in 2019 as foreign listing interest picks up, in tandem with investors' shift to safer havens, said investment bank Credit Suisse.

Tan Kuan Ern, head of Singapore coverage, investment banking and capital markets, said the number of reverse enquiries from foreign sponsors looking to list US or European assets in Singapore has jumped to the most he has seen in the last five years.

In fact, "it's to the point that we now have to be a bit selective as to what we think will really sell, and what we think investors will want".

Mr Tan believed sponsors' branding and level of name recognition will be important in appealing to investors, who currently have a menu of 42 locally listed Reits and property trusts to choose from. In particular, foreign sponsors who partner well-known local entities can do better, he said, citing the example of Keppel-KBS US Reit.

Traditionally perceived as safer haven assets, Reits saw a net inflow of S$28.1 million from institutional investors in November, after two consecutive months of net outflows, going by Singapore Exchange data. In addition, collectively, they have an average indicative dividend yield of 6.7 per cent, according to the SGX data.

Credit Suisse is also positive on the local tech sector, in an otherwise lacklustre equity capital market that will continue to see tight windows for dealmaking next year, as global markets remain volatile.

Mr Tan said: "There's a lot of promise in the tech space which is fast growing and a real hotbed of activity that I haven't seen in many other places. Finding the next generation (of entrepreneurs) is a big focus for us because we want to back them to take their business to the next level."

Bonds - both US and Singapore dollar denominated - will also continue to see appetite from investors next year, though preference has shifted to investment-grade credit, given the current flight to safety.

According to Mr Tan, the market no longer wants high-yield credit to come through: "Even if you're paying 8-9 per cent, at least from a Singapore perspective, everyone will prefer to take a high-quality credit paying 4 per cent than a low-quality credit paying 8-9 per cent."

For example, OCBC Bank, which put up a S$1 billion perp deal in August received a hot reception, prompting the bank to tighten the pricing from the initial price guidance of 4.375 per cent to a final pricing of 4 per cent, according to the bank. The final order book exceeded S$3 billion.

Temasek Holding's S$500 million retail bond, offering an annual coupon of 2.7 per cent, was also 6.2 times oversubscribed in October.

READ MORE: Worries over US tax rules lifted for Manulife US Reit, Keppel-KBS US Reit