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APAC REITs Fall on US Elections, Pandemic Jitters; Singapore Leads Regional Decline

APAC REITs Fall on US Elections, Pandemic Jitters; Singapore Leads Regional Decline

The region saw increased fundraising in October, with share placements by Mapletree Logistics Trust and Nippon Building Fund.

By Patrick Ma, Director, Listed Products and Research

November 4, 2020 – Global capital markets continued to weaken in October, following an already dull performance in September. Three significant developments led to the muted performance of global equities: uncertainties stemming from the upcoming US presidential election, a lack of progress in US fiscal stimulus talks and renewed concerns about the coronavirus pandemic in Europe. 

In turn, global REITs were affected and underperformed global equities. Asia Pacific REITs dropped 4.4% in October and lagged behind Asia Pacific equities. Asia Pacific equity market performance had been mainly propelled by substantial gains in Chinese equities, especially tech stocks, on the back of China’s continued economic recovery from the coronavirus pandemic, new policy directions from its 14th Five-Year Plan, and Ants Holding’s upcoming US$34 billion IPO. 

Among individual REIT markets in the region, Singapore REITs were the worst performers with a 7.1% decline after investors took profits following a strong rebound of 17% from March lows.

Australian REITs were also weaker, falling 3.1% during the month, with leading retail REITs such as Scentre and Vicinity Centres sliding 5% and 12%, respectively, due to soft local retail sales. 

Invincible Investment and Ichigo Hotel REIT Rise

Meanwhile, Japan REITs fell 4.3%, led by office REITs such as Nippon Building Fund, which is down 11% for the month. Japan hospitality REITs, on the other hand, outperformed in October. Invincible Investment and Ichigo Hotel REIT, in particular, rose 6.6% and 2.4%, respectively, making them the best-performing Japan REITs for the month. 

We have also seen increased equity fundraising activities, such as share placements by Mapletree Logistics Trust in Singapore and Nippon Building Fund in Japan, as well as the proposed IPO of Australia’s Home Co Daily Needs REIT, a spin-off from ASX-listed Home Consortium Limited.

Near-term volatility likely

At the time of our writing, the US Elections are underway. While the latest polls suggest a victory for Joe Biden, the possibility of a Trump victory cannot be ruled out. Moreover, if the election results turn out to be a close call and contested by either side, uncertainty over the results may persist for days, similar to what happened in 2000. Thus, we expect market volatility to rise in the near-term. 

Also, while the uncertainty on US Elections may cloud the near future, a large US fiscal stimulus of varying size is likely to come whoever wins the White House to deal with the pandemic and reflate the economy. In that case, we believe that a US-led global economic recovery in 2021 is likely. This is positive for the Asia Pacific region’s economies and REITs. 

As we have stated previously, the coronavirus pandemic and the China-US trade wars since 2018 has further accelerated the trend of “de-globalisation” or restructuring of global supply chains. This is unlikely to change regardless of who wins the US Elections. Thus, we expect demand for logistics properties and REITs to stay strong for now.

REIT Index Equity Index

Oct 2020 YTD-2020
Oct 2020 YTD-2020
GPR 250 REIT Index  -3.3% -22.3% MSCI WORLD -3.0% -1.0%
GPR Aprea Investable REIT 100 Index -4.4% -16.9% MSCI AC ASIA PACIFIC 1.0% 1.8%
GPR Aprea Investable REIT Australia -3.1% -19.5% MSCI Australia 0.0% -11.4%
GPR Aprea Investable REIT Japan -4.3% -17.9% MSCI Japan -1.6% -1.9%
GPR Aprea Investable REIT Singapore -7.1% -12.4% MSCI Singapore -2.7% -24.2%
GPR Aprea Composite REIT Index Hong Kong -3.3% -25.1% MSCI Hong Kong -1.2% -9.4%
Based on the market close on October 30, 2020

All performance numbers are based on total gross returns in USD

Sources: GPR and Bloomberg

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