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Asia Pac REITs Underperformed Equities In May, Led By Hong Kong’s 10.5% Fall, Japan Outperforms

(By Patrick Ma, Director, Listed Products and Research, Admiral Investments)

June 2, 2023 – Global REITs, including Asia Pacific REITs, underperformed equity markets after tech and AI-related stocks climbed. 

Japan REITs were the best-performing in the region on the back of increased overseas investors’ interests in local assets. 

Japan has been seeing increased interest from overseas investors due to market expectations that its economy will see higher inflation and, eventually, a reversal of its ultra-loose monetary policy. Meanwhile, overseas fund flows into Japan have continued to rise on a weaker yen.

In May, global capital market sentiment was dictated by uncertainty over US recessionary pressure and debt ceiling negotiations between the Democrats and Republicans.

Despite the clouded global economic and interest rate outlook, investors continued to be optimistic about the technology sector, especially AI-related stocks, which drove the performance of the US equity market.

Asia Pacific equity markets were dampened by weaker-than-expected China economic recovery, especially its disappointing Manufacturing Purchasing Managers’ Index numbers.

While the US has averted defaults with its debt ceiling negotiation’s conclusion, its economic outlook remains mixed. A still-strong labour market and higher inflation point to a possible Fed rate hike, while weak credit demand suggests recession risks. In Asia Pacific, China’s shaky recovery has led to worries about a weakening economic outlook for the region. The markets have also started to speculate about the prospect of the government loosening its monetary policy to stimulate economic growth. Such a move will be positive for REITs in the region.