Safety Bubble?

Two articles in today’s Straits Times caught my eye. One was “Reits look like good bets to yield-hungry investors” and the other was “GIC more cautious in going for higher returns“. Both talked about a “bubbly” situation.

The first article touched on the FTSE ST REITs Index outperforming the Straits Times Index by 4% since January. It also touched on this term called a “safety bubble” where investors are “wanting yield and earnings visibility in the shares they buy – and this has caused a run-up in sectors such as Reits.”

In the second article, Government of Singapore Investment Corporation (GIC) is “more cautious about seeking higher returns as yields remain low ahead of the “end game” in the next five to 10 years.” Borrowing costs are low and therefore, investors are seeking higher-yield assets. Bill Gross, who is running the world’s biggest bond fund at Pacific Investment Management Co., said that, “We see bubbles everywhere. As long as the Fed, and the Bank of Japan and other central banks keep writing checks and don’t withdraw, then the bubble can be supported.”

The two articles tie back to my previous blog post on “Are SGX-listed REITs in a Bubble?“. The REITs Index is going higher and the valuation of REITs are increasing in tandem. This article from Fundsupermart makes a good read to tie up my thoughts.

Investors have to be cautious going forward amid this low-interest rate and rising asset prices. It’s better to be safe than sorry!

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