Look to Singaporean and Hong Kong for investments that offer quality and income, Lim Say Boon, chief investment officer at DBS Wealth Management, told CNBC’s “Street Signs.”
Lim’s recommendation came amid concerns about monetary policy globally, which has spurred surges in asset prices, leading to negative interest rates in many bonds and over-valuation across many equity markets.
“This is a historical struggle between economic dysfunction and policy intervention. This can go on for years,” Lim said. But for investors, “You have to be earning income. You can not be sitting on cash,” he said.
“You don’t necessarily have to be in stocks. We are recommending to our clients that if you have to be in stocks, be in quality and be in income. So we’re recommending income equities, dividend paying stocks,” he said.
That’s why DBS Wealth Management advised clients to look at Hong Kong and Singapore, Lim said.
“In Singapore, the dividend yield is 4 per cent, in Hong Kong H-shares, it’s 4.2 per cent. The global average is 2.7 per cent, the US is 2.2 per cent,” he said, calling US dividend stocks overvalued.
Lim said he was particularly interested in Singapore and Hong Kong real-estate investment trusts (REITs).
“There are REITS out there with sustainable yields, with long-term leases locked in over a period of time,” he said, noting that Singapore REITs generally paid yields above 4 per cent, while Hong Kong REIT yields could be even higher.
Last week, Singapore-based DBS Bank said in a note that it expected Singapore REITs would remain steady amid market volatility, while yield spreads, which were wider than historical averages, would help to cushion potential downside in the shares.
It estimated Singapore REITs were offering yields around 6.3 per cent, about 30 basis points above their historical mean, excluding the global financial crisis. That compared with the 10-year Singapore government bond yield at around 1.8 per cent, the note said.
