Asia Pacific REITs Rallied in July, Discounting Rate Hikes

Asia Pacific REITs jumped 6.9% during the month, beating equities’ 1.1% rise. Australian REITs shined, rising 12%

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

August 2, 2022 – The news flow for July remained challenging, with the market expecting the developed world’s central banks to stay on the course of hiking interest rates and tightening monetary supply to combat inflation. On the back of rising inflationary pressure, the ongoing war in Ukraine, and slowdowns in major regions such as the US, Europe and China, the global economic growth outlook is also deteriorating. Despite the negative factors, capital markets rebounded in July as investors shrugged off further interest rate increases. Global equities rebounded 8% during the month. 

Global REITs outperformed global equities in July with an 8.5% increase. In the Asia Pacific region, REITs jumped 6.9% during the month, beating equities’ 1.1% rise. Australian REITs shined, rising 12% and recovering some of the lost ground in June amid expectations of a further rate hike by the Reserve Bank of Australia.

As we look forward, we expect concerns about continuing interest rate increases, persistent inflationary pressure, the slower growth outlook for most of the major economies and possible recessions in the US and the European Union to continue to affect market sentiment. However, as markets appeared to have discounted further deterioration of the global economic outlook and considered less aggressive interest rate hikes by central banks, capital markets showed signs of stabilising. Considering that there is room for a further spike in the USD and current US Treasury yields being limited, we expect further outperformance by Asia Pacific REITs.