M-Reits unfazed by quarter-point rate hike

AllianceDBS says that's because their loans are mostly fixed-rate

Published Wed, Aug 6, 2014 · 10:00 PM
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MALAYSIAN Reits remain a sound defensive choice for investors as they are expected to yield steady returns, with the recent 25 basis point interest rate hike seen as having little impact because the bulk of their loans are fixed. Examples include Axis, a commercial and office/industrial Reit, and CapitaMalls Malaysia Trust (CMMT) where 70 per cent of loans carry fixed borrowing rates. Consequently, the quarter-point increase in the overnight policy rate in July that bumped the key lending rate to 3.25 per cent should have minimal impact on the Reits' earnings, AllianceDBS Research said.

Office Reit Quill Capita Trust (QCT) is further ahead - a hefty 95 per cent of its loans are pegged at a fixed rate.

A similar rate hike might be looming but economists are divided as to whether the central bank would implement the move before the year is out or give borrowers a reprieve before bumping up lending rates in the first half of 2015.

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