Market Update for March 2019
A Return to Easing Policies Amid Global Economic Concerns Helped Asia Pacific REITs’ Performance
By Patrick Ma, Director, Listed Products and Research, Admiral Investments
A concerted effort by governments and central banks to maintain growth through easier monetary and fiscal policies have helped to bolster Asia Pacific REIT’s performance in March.
Amid the on-going Sino-US trade negotiation and Brexit, the Chinese government has unveiled a substantial CNY 1 trillion (US$150 billion) tax-cut package and other counter-cyclical policies to support economic growth. In the U.S., the Federal Reserve has signalled a U-turn on its monetary policy with indications of no further interest rate hikes for the rest of 2019 and a reversal of balance-sheet tightening.
Against such a backdrop and expectations of further easing from major central banks, Asia Pacific’s REITs outperformed the region’s equity indices in March. The GPR/APREA Investable REIT Index reported +4.1% for March, compared to MSCI Asia Pacific’s -0.1%.
On a year-to-date basis, Asia Pacific’s REITs have also outperformed the region’s equity indices. Australian REITs have been among the strongest performers as the region’s market discounted risks from falling local housing prices.
As we look forward, the market is showing signs of economic softening in various parts of the world. These indicators include the inverted U.S. yield curve and a renewed fall in the 10-year treasury yield, declines in the Turkish currency and equity markets, and the spread of currency weakness across the emerging markets. Policymakers around the world have returned to loosening policies in anticipation of a possible recession.
This combination of recession concerns and easing monetary and fiscal policies should be favourable for Asia Pacific REITs, which are often viewed as a safe-haven sector amid market volatility.