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Asia Pacific REITs May Outperform as Equities Face a Challenging August

Asia Pacific REITs May Outperform as Equities Face a Challenging August

New China tariffs, Hong Kong protests dent equity market sentiment 

(For Hong Kong REIT rules, click here. For Hong Kong’s REITs’ performance chart, click here.)


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

The global geopolitical environment improved in July after the U.S. resumed trade talks with China and moderated its sanctions against Huawei. These events bolstered market sentiment.  The MSCI World rose 0.5% in July after a 6.6% jump in June.

For the Asia Pacific region, the GPR/APREA Investable REIT Index reported a 0.9% increase in July against a 0.8% drop in the MSCI AC Asia Pacific index. Performances for equity indices and REITs were diverse. Both Japan and Australian equity markets generated positive performances, with REITs outperforming equities. This is on the back of Japan’s continuing easing policy and expectations of a rate cut by the Reserve Bank of Australia (RBA). Singapore REITs dropped 1.6% for the month versus Singapore equities’ 0.9% fall, as numerous fundraising activities by local REITs and weak sentiment about the economic outlook took its toll. Hong Kong REITs dropped 6.3% for the month, compared with a 3.3% fall in Hong Kong equities, as the escalation of the protests over the extradition bill negatively affected market sentiment and the retail sector.

At the start of August, the Fed cut its rates by 25 basis points (bps). But the Fed Chairman labelled the rate cut a “mid-cycle” cut and not the beginning of an easing cycle, as the markets had anticipated. At the same time, U.S. President Donald Trump announced a new tariff hike on China’s imports, which dashed hopes of a resolution over the trade conflict in the near term. Market sentiment is likely to remain negatively affected, However, Asia Pacific REITs may be more resilient amid adverse market conditions due to their defensive quality.

REIT Index Performance Corresponding equity index Performance
  Jul 2019 YTD 2019   Jul 2019 YTD 2019
GPR  250 REIT Index  1.01% 17.72% MSCI WORLD 0.52% 17.99%
GPR Aprea Investable Reit 100 Index 0.91% 18.61% MSCI AC ASIA PACIFIC -0.75% 9.89%
GPR Aprea Investable Reit Australia 1.21% 18.27% MSCI Australia 0.63% 20.39%
GPR Aprea Investable Reit Japan 3.56% 17.40% MSCI Japan 0.14% 8.12%
GPR Aprea Investable Reit Singapore -1.59% 21.06% MSCI Singapore -0.94% 12.55%
Based on market close at July 31, 2019
All performance numbers are based on total gross returns in USD
Sources: GPR and Bloomberg