Eyeing the growing potential of real estate markets in the Asia-Pacific region, Taiwan International Investment Management Co (金鼎投信) announced that it will issue the nation's first regional real estate investment trusts (REITs).
The investment unit of Taiwan International Securities Corp (金鼎證券) is slated to issue REITs and high-dividend property stocks covering 11 countries in the Asia-Pacific region -- including Taiwan, South Korea, Hong Kong, Singapore and Australia -- starting on March 6, according to a company statement.
With preferential tax breaks and steady returns, REITs have become a popular investment instrument, the statement said.
REITs buy and manage properties, including shopping malls and office buildings, and pay dividends to shareholders from the rental income they make.
Given the optimistic economic outlook and stronger currencies, along with huge demand in China and India, the property market in the Asia-Pacific region has been booming in recent years, giving REITs high dividend returns, the statement said.
Asia's economic growth, excluding Japan, is projected to reach 6.9 percent this year, exceeding the 4.3 percent expansion expected for the global economy, according to a recent forecast by IMF.
REITs in Australia, South Korea and Hong Kong reported dividend yields of more than 6 percent last year, the statement said, adding that excluding Japan, the market value of REITs in the Asia-Pacific region will jump from US$7 billion last year to US$75 billion in 2010.
The Link REIT (領匯基金), Hong Kong's first property trust, raised HK$19.8
billion (US$2.6 billion) in November last year from a share sale, becoming
the world's biggest initial public offering of a property trust.
In contrast, Taiwan's REITs seem to have lagged their Asian counterparts. A
report by Taiwan Ratings Corp (中華信評) released last month said that
domestic REITs may be hurt by rising interest rates and falling rental
The nation's central bank started lifting interest rates in October 2004 and
had raised its rediscount rate by 87.5 basis points to 2.25 percent as of
Dec. 23 last year. The bank may further increase benchmark interest rates,
following the lead of the US Federal Reserve, analysts said.
The average rental yield on office buildings in Taipei dropped to 5.3
percent in 2004, from more than 6 percent in 2003, making Taiwanese REITs
less attractive, Taiwan Rating said in the report.