By Dominic Whiting
SINGAPORE (Reuters) - Property derivatives are taking root in Hong Kong and Australia and will soon debut in Singapore and Japan, according to broker GFI, but markets will not prosper until banks create products to draw retail investors.
Some global investors and developers would relish having the new products to hedge their positions in Asia's notoriously volatile markets, Steve Moore, head of Asia property derivatives at GFI, said on Wednesday.
But others might find the markets just too risky.
"In Asia, where a market can drop 50 percent in a year, or double as it has in Singapore, some people might stay away from derivatives and others will be tempted in," Moore said in an interview during the Reuters Real Estate Summit in Singapore.
"But the market won't take off until we unlock the retail side, and then we'll see it grow infinitely."
Following the British market's lead, Asia's fledgling property derivatives are essentially a two-way bet based on a property index.
One party agrees to pay a benchmark interest rate plus a spread after a certain period, while the counterparty will pay the property returns indicated by the index.
Asia's first property derivatives trade was unveiled in February -- a Hong Kong deal between Dutch bank ABN AMRO and Sun Hung Kai Financial based on a new residential index run by Hong Kong University. Continued...
© Thomson Reuters 2008. All rights reserved.
| Paper | Aug 20 - 21, 2008 | Manufacturing |
| Japan Investment | Jul 01 - 2, 2008 | Country Summits |
| Global Real Estate | Jun 23 - 25, 2008 | Real Estate |
| Consumer and Retail | Jun 16 - 18, 2008 | Consumer Retail |
| Investment Outlook | Jun 09 - 12, 2008 | Financial Services / Exchanges |
