If your risk appetite is low and do not wish to invest directly into any property stocks then maybe investing in Real Estates Investment Trusts(REITs) might be a good alternative investment. It is best suited where there is a booming property sector, the risk premium is great where share price performance remains susceptible to the volatility in the share market.

Unlike previous years, you should no longer find yourself in a quandary to look for REITs stocks as there are currenty 12 REITs listed on Bursa Malaysia with a combined market capitalisation of more than RM5bil.

Most of the assets under the REITs are commercial buildings in prime areas with strong occupancy rates. Among the most active players is Quill Capita Trust, which recently acquired Wisma Technip and part of Plaza Mont Kiara to boost its portfolio. Axis REIT had also announced a string of acquisitions in recent months. Others, like Al-Hadharah Boustead REIT, offer an opportunity to invest in syariah-compliant plantation assets, while the Al-Aqar KPJ REIT was the first Islamic healthcare REIT in the world.

For those unfamiliar with REITs, the basic main features are:

1. Stable earnings and income growth, which make them an attractive defensive bet at times of uncertainties.

2. Downside risk for such instruments was supported by the value of their assets holdings, as well as the yields offered.

This therefore provides the wary and prudent investor with some degree of capital protection.

According to RHB Research:

• Most Malaysian REITs returned 90% of their distributable income as dividends to unitholders, translating into an average forecast yield of 5.3% this year, and would rise to 6.9% in 2008 and 7% in 2009.

• At these rates, the REITs offer better returns compared with the average annual income from investing in 10-year government fixed-income instruments.

• Local REITs’ yields are also superior compared with their counterparts in Singapore, RHB Research noted, giving them a further potential for capital appreciation.

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