Lower OPR could drive investor demand for MREITs

  • Analyst Reports
  • Wednesday, 04 Mar 2020

KUALA LUMPUR: The recent reduction in the overnight policy rate and declining global government bond yields should keep MGS yields compressed and drive investor demand for alternative yielding assets such as Malaysian REITs, says Affin Hwang Capital research.

The research house, which has an overweight recommendation on the sector, said it expects the 10-year MGS yields to remain below 3%.

Affin Hwang's top picks in the sector are Axis REIT and KLCC with target prices of RM1.97 and RM8.13 respectively.

Over the long run, a lower OPR should also lower the finance costs of MREITs and lift earnings although Affin Hwang expects the impact on near-term profit to be minimal.

For 2020, the 25bps OPR rate cut is expected to have a muted impact of under 1% of the MREITs' earnings, it said.

It said most of the MREITs under its coverage, including Axis REIT, IGB REIT, KLCC Stapled Group and YTL REIT have over 70% of their borrowings pegged at a fixed rate.

Other REITs under its coverage including Pavilion REIT and Sunway REIT have fixed rates for 43% of their borrowings.
Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 18
Cxense type: free
User access status: 3

Did you find this article insightful?


Across the site