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Asia Pacific REITs down 7.8%; Japan, Australia REITs Drop Less Than Equities

Asia Pacific REITs down 7.8%; Japan, Australia REITs Drop Less Than Equities

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

March 3, 2020- Global equity markets have been hit hard by heightened concerns about the impact of the coronavirus outbreak, as the situation escalated in mainland China and spread to more than 60 countries in February. The MSCI World Index dropped 8.4% during the month, as concerns grew over the economic impact of the outbreak.

For the Asia Pacific region, the GPR/APREA Investable REIT Index reported a 7.8% decrease in February versus the MSCI AC Asia Pacific’s 6% drop over the same period. The main driver for the underperformance of Asian REITs is Hong Kong. The coronavirus outbreak has hurt its already-fragile tourism and retail sectors. On the other hand, REITs in Australia, Japan and Singapore were relatively resilient in February, outperforming general equities by 2.5%, 1.2% and 0.2%, respectively. On a year-to-date basis, Asia Pacific REITs have outperformed the MSCI AC Asia Pacific Index by 2.9 percentage points.

Given that the coronavirus outbreak has spread worldwide, markets have been evaluating its impact on the global economy, including how it may affect the manufacturing supply chain as well as consumption and tourism. Global capital markets have become more volatile as market sentiment swings from overriding pessimism about the impact of the outbreak on an already-fragile global economy to optimism towards a post-outbreak rebound. The markets are also expecting more fiscal and monetary stimulus from governments to counter against the economic slowdown. We believe the global equity markets will continue to be volatile as concerns over the coronavirus outbreak remain. 

While we expect the coronavirus outbreak to weaken selected REITs, especially those in the retail and hospitality sectors, we believe Asia Pacific REITs’ relatively stable earning streams will enable them to outperform equities under the current market environment.

REIT Index Performance Corresponding equity index Performance
  Feb 2020 YTD-2020   Feb 2020 YTD-2020
GPR  250 REIT Index  -8.20% -7.02% MSCI WORLD -8.41% -8.94%
GPR Aprea Investable REIT 100 Index -7.80% -5.82% MSCI AC ASIA PACIFIC -6.04% -8.72%
GPR Aprea Investable REIT Australia -8.48% -7.43% MSCI Australia -10.98% -10.90%
GPR Aprea Investable REIT Japan -7.94% -4.35% MSCI Japan -9.14% -10.37%
GPR Aprea Investable REIT Singapore -6.92% -5.33% MSCI Singapore -7.10% -10.32%

Based on market close at February 28, 2020

All performance numbers are based on total gross returns in USD

Sources: GPR and Bloomberg