Singapore Exchange pioneers Asia’s first international REIT futures

Singapore Exchange (SGX) has announced that it is pioneering Asia’s first international real estate investment trust (REIT) futures based on indices tracking diverse REITs listed in Singapore, Hong Kong, Malaysia and Thailand.

SGX has said the listings come on the back of rising global investor demand for real estate related investment products and trading solutions, according to a press release.

On 24 August 2020, SGX will launch SGX FTSE EPRA Nareit Asia ex-Japan Index Futures  and SGX iEdge S-REIT Leaders Index Futures.

The FTSE EPRA Nareit Global Real Estate Index series is a widely followed global benchmark, with an estimated USD340 billion of assets under management actively benchmarked or passively tracking the indices, reports SGX. The iEdge S-REIT Leaders Index is the most liquid index-basket representation of the Singapore REIT (SREIT) market and one of the most widely referenced in SGX’s suite of indices. Both futures are designed in accordance with Commodity Futures Trading Commission guidelines, which would allow broad distribution to US and global institutional investors.

The listing of the SGX FTSE EPRA Nareit Asia ex-Japan Index Futures and the SGX iEdge S-REIT Leaders Index Futures builds on the forte of the Singapore stock market, following the launch of Singapore Single Stock Futures in June 2020.

Michael Syn, Head of Equities, SGX, said: “We continue to broaden our Singapore franchise with innovative products that capitalise on the strengths of our cash equities and equity derivatives businesses. Singapore is the REITs growth capital of Asia, attracting global institutional investors looking for defensive returns, particularly in today’s volatile markets and low interest rate environment. Over the past 18 years since the first REIT listing on SGX, we have established a strong REIT ecosystem with increasing investor interest, deep liquidity and active issuer participation.  SGX offers a comprehensive product suite, ranging from stocks, REIT ETFs – and now REIT futures – to meet increasing customer demand.”

Recent years have seen alignment in REIT performances globally, buoyed by rising investor interest, says the Exchange. With Singapore’s emergence as the newest global international REIT hub, SGX plays a role in round-the-clock price discovery, in addition to facilitating significant rotation of institutional flows.

Singapore is the largest REIT market in Asia ex-Japan, with 44 REITs and property trusts which have a combined market capitalisation of SNG98 billion. The market capitalisation of SREITs and property trusts has grown at a compounded annual growth rate of 15% in the last 10 years. Compared to other asset classes, they offer one of the highest dividend yields and lower volatility, with average dividend yield of 7.1%.

In 2019, close to 45% of REIT IPOs worldwide debuted on SGX, surpassing the largest REIT markets of US, Australia and Japan. Singapore is one of the largest global REIT hubs in the world, where over 80% of the REITs hold overseas assets, spread across geographies and sub-sectors.