AmInvest: Property bubble building up but not alarming

By Goh Thean Eu (Business Times)

AmInvestment Bank Group director of retail funds says he sees a small bubble in the property market, but it's no where near big yet

KUALA LUMPUR: There is a property bubble building up in Malaysia and the region but it is nowhere near alarming levels as the main indicators are still at comfortable levels, AmInvestment Bank Group said.

"As an investor, I love bubbles because that's where the money is. At this juncture, I see a small bubble in the property market, it's no where near big yet and I'm not seeing any property bubble bursting soon," AmInvestment Bank Group director of retail funds Ng Chze How said.

"For that to take place, I think you need to see a few factors taking place. Firstly, you need to see very high overall borrowings and leveraging, which is currently not happening. Secondly, is to look at the non-performing loans (NPLs). Across this region, the NPLs are still very healthy. Thirdly, you need to look at the liquidity in the market. 

There's so much liquidity, so much cash sitting in the system."

Ng was speaking to the media after the launch of the country's first Asia Pacific REITs unit trust fund by AmMutual here yesterday.

The unit trust funds will be solely investing in REITs in Asia.

For a start, it is looking at Australia, Hong Kong, Singapore, besides a minimal exposure in Malaysia. The fund will be managed by Funds Management Division (FMD) of AmInvestment Bank Group.

"When we are creating this fund, we want it to be riskier than bonds but safer than equities. This fund does that. It offers investors opportunities to diversify away from stocks and bonds and thus, reducing investors' overall portfolio risks," said FMD chief executive officer Datin Maznah Mahbob.

She added that investors will receive high dividend yields from investing in REITs as the fund is structured to distribute a high percentage of its profit to shareholders.

Over the past five years, the performance of REITs in Asia had outperformed global REITs by more than three times. During the period, REITs in Asia grew 46.2 per cent, while REITs globally grew 14.4 per cent.

"We are comfortable with Asian properties, in line with the region's continued growth, which will lead to an increasing demand for commercial occupancy rates in Asia, which are averaging to above 90 per cent.

"For certain countries in Asia Pacific, we are seeing an uptrend in rental rates for both offices and the retail sector, which will bode well for unitholders of REITs as this translates to higher income distribution," said Andrew Wong, chief investment officer of equity, asset allocation, and fund management.

The approved fund size is 200 million units with an initial offer price of 50 sen per unit. The initial offer period ends this Sunday, and its minimum investment being RM1,000 for Malaysian residents and the minimum additional investment for Malaysian residents is RM500.

The fund is distributed by all AmBank branches, AmBank Agency sales force, AmPriority Banking, AmPrivate Banking and Hong Leong Bank.