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Asia-Pac property could emerge winner aid US Fed taper

Publication Date : 23-12-2013


Investirs will likely be rejigging their portfolios following the United States Federal Reserve's move to reduce stimulus spending, with real estate, gold and shares all under scrutiny, said analysts.

One potential winner is Asia-Pacific property, now that much of the uncertainty of the stimulus tapering has been removed, said consultancy CBRE.

More importantly, the tapering is a sign of the improving US economy, which should spur investment in real estate.

CBRE global research head Nick Axford told The Straits Times: "Asia-Pacific is seeing much higher rates of demand and growth than other regions, so companies would find it offers good opportunities when deciding which part of the world to expand to." Commercial real estate, including retail, office and industrial space, is the likely beneficiary of improved demand as firms seek to grow, he added.

But the impact on Singapore could be muted.

CBRE associate director Desmond Sim said: "As much of the capital coming into the Singapore market still comes predominantly from Asia, CBRE does not expect much impact from the Fed move."

While the US dollar may strengthen with tapering and make properties here cheaper, Savills Singapore research head Alan Cheong said few investors will spend based on the exchange rate. "Institutional funds do not make decisions based on the currency exchange as there is the risk that they may make a loss five years down the road when the exchange rate is not in their favour," he said.

One asset class that is losing its lustre is gold, falling to US$1,188 an ounce in New York last Thursday, its lowest price in three years.

The yellow metal was popular as a hedge against inflation when the Fed flooded the markets with cheap money. But ABN Amro wrote in a report released last week: "More attractive returns on other investments, the outlook for lower prices, an environment of low inflation risk and positive investor appetite will result in investors reducing gold positions."

It predicts that prices could fall to US$1,000 by the end of next year as the threat of higher inflation from the monetary stimulus recedes.

Emerging market equities are another asset class that could be affected through greater volatility.

Countries with a current account deficit, such as Brazil, South Africa, Turkey, Indonesia and India, are most vulnerable, said Hartmut Issel, head of UBS' Asia-Pacific wealth management research.

He added that India, Indonesia, Brazil and Turkey have acted to cut their deficits, while financial markets have also priced in the Fed taper, so the impact will not be as pronounced this time around.


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