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Admiral Investments: Risk-Averse Market Sentiment Helped Asia Pacific REITs’ Performance in August

By Patrick Ma, Director, Listed Products and Research

Admiral Investments: Risk-Averse Market Sentiment Helped Asia Pacific REITs’ Performance in August

The sentiment for global capital markets deteriorated in August. The U.S. 30-year treasury bond yield fell below 2% for the first time. Meanwhile, the negative yield curve for Germany signalled weakness in the EU economy.

On the political front, a lack of progress in the Sino-U.S. trade talks also dampened investor confidence. This followed U.S. President Donald Trump’s announcement of new tariffs in early August, and he further urged U.S. companies to move their operations back home. China let the yuan breach the 7-per-US dollar level for the first time in more than a decade while the MSCI World dropped 2%.  

For the Asia Pacific region, the GPR/APREA Investable REIT Index reported a 1.9% increase in August versus the MSCI AC Asia Pacific’s 3.1% drop over the same period.  REITs in Japan were the best performing in the Asia Pacific region. They led with a 6.2% increase for August, compared with a 1.0% drop in Japanese equities. 

In general, a combination of lower global interest rate expectations and positive market sentiment towards safe haven investments helped contribute to Asia Pacific REITs’ outperformance against equities. The exception has been Hong Kong REITs, which dropped 8.8% for the month and slightly underperformed the MSCI Hong Kong, which fell 8.3%. The continued protests in Hong Kong has started to affect local market sentiment, especially the retail sector.

We have already seen the markets shifting towards defensive plays in August as global uncertainties rise. Expectations for lower interest rates and slower economic growth globally should continue to fuel Asia Pacific REITs’ outperformance against equities.

REIT Index Performance Corresponding equity index Performance
  Aug 2019 YTD 2019   Aug 2019 YTD 2019
GPR  250 REIT Index  2.74% 20.95% MSCI WORLD -2.00% 15.63%
GPR Aprea Investable Reit 100 Index 1.93% 20.90% MSCI AC ASIA PACIFIC -3.12% 6.46%
GPR Aprea Investable Reit Australia -0.60% 17.56% MSCI Australia -4.31% 15.20%
GPR Aprea Investable Reit Japan 6.20% 24.67% MSCI Japan -1.01% 7.03%
GPR Aprea Investable Reit Singapore 0.85% 22.09% MSCI Singapore -6.02% 5.77%

Based on market close at August 31, 2019

All performance numbers are based on total gross returns in USD

Sources: GPR and Bloomberg