Asia Pacific REITs Outperformed Global REITs in 2022 Led by Singapore
Global REITs were down 24% compared to Asia Pacific’s 18% drop in 2022. In December, Hong Kong REITs were the best-performing in the Asia Pacific region.
By Patrick Ma, Director, Listed Products and Research, Admiral Investments
Jan 4, 2023 – The top 100 most-traded REITs in Asia Pacific rose 1% in December 2022, compared to the MSCI Asia Pacific’s 0.2% drop, with Japan and Hong Kong REITs taking the lead.
In 2022, global REITs and Asia Pacific REITs fell 24% and 18%, respectively, and the asset class underperformed equity. The global capital market was affected by sharp policy rate hikes and a reversal of quantitative easing led by the U.S. Federal Reserve. Amid the gloom, Singapore was the leading REIT market for the year due to rising asset prices, robust economic growth and capital inflows.
In December 2022, Hong Kong REITs were outperformers on the back of expectations of the “reopening” of the Hong Kong-China border following the mainland’s change in Covid-control policies. The GPR APREA Composite REIT Index Hong Kong climbed 14.1%, which exceeded the MSCI Hong Kong’s 8.1% gain.
Elsewhere, the Bank of Japan surprised the market by widening the range of the JGB 10-year yield to 0.5% from 0.25%. This change to its ultra-loose monetary policy supported
the Japanese yen, which led Japan REITs to outperform the regional REITs.
Equity markets globally followed U.S. equities lower after the U.S. Federal Reserve raised the policy rates by 50 basis points to 4.4 %. The Feds also indicated that it expects to keep rates higher throughout 2023, with no reductions projected until 2024.
With rates seen staying elevated, investors expected the U.S. and other developed markets to fall into recession in 2023. The projected weaker economic growth raised concerns about the global capital market outlook, leading to equities’ fall. The bearish sentiment also led to a weaker USD.
Although global REITs fell, they outperformed global equities, supported by the fact that investors perceived REITs as defensive plays under a weakening macroeconomic backdrop
Overall, the Asia Pacific region’s equities and REITs outperformed their developed markets’ peers on the back of the weak USD and the positive sentiment caused by the Chinese government’s announcement to “reopen” the country on January 8, 2023.
As we look forward, the markets expect the U.S. interest rate cycle to peak just as the U.S. economy enters a recession. For Asia Pacific, the post-Covid reopening of China is likely to support economic growth for the region, especially for tourist-related sectors. Thus, we are optimistic about the regional REITs’ performance for 2023, especially for the hospitality and retail sectors