Asia Pacific REITs Rebounded In April On Signs Of Pandemic Stabilisation And Government Stimuli
By Patrick Ma, Director, Listed Products and Research, Admiral Investments
Australia and Singapore REITs outperformed their countries’ equities
The GPR/APREA Investable REIT Index reported a 7% increase in April after the coronavirus pandemic showed signs of peaking. Aggressive fiscal and monetary responses from governments and central banks around the world as well as early signs of the discovery of drugs against the virus also contributed to the gains.
However, the index underperformed the MSCI AC Asia Pacific Index, which climbed 8% over the same period. Concerns over potential rental income losses from lockdowns and disruptions on tourism and trade remained overhanging, dragging Asia Pacific REITs’ relative performance vis-à-vis equities. With the abundance of liquidity as governments around the globe adjusted rates lower, markets rebounded strongly. The MSCI World Index climbed 11% for the month, reversing a 21% drop in the first quarter. Similarly, global REITs rose 8% for the month, but the gains still lagged behind global equities.
Australia and Singapore REITs outperformed their countries’ equities, while Hong Kong and Japan REITs underperformed. Australia REITs saw the strongest rebound among Asia Pacific REITs with an increase of 22%, led the recovery of leading retail REITs such as Scentre Group and Vicinity Centres. Singapore REITs rose 10% for the month as investors discounted negative news such as a spike in local Covid-19 cases, tighter policies against the pandemic, and the prospects that Singapore REITs could see their rental income and dividend cut due to rental rebates and waivers.
Hong Kong REITs rose 3%, but still underperformed local equities, as market expectations of China’s rebound and further stimulus fuelled stock performance.
Japan REITs, as a group, are the only REITs that recorded a drop of 0.2% in April. However, despite declines led by the larger-cap REITs, selected hotel and logistics REITs rebounded during the month.
Despite the ongoing pandemic, capital markets have already discounted a worst-case scenario and were positive about the new rounds of lower interest rates and quantitative easing. This is especially as the Covid-19 situation for most countries in the Asia Pacific region seems to be stabilising. However, U.S. President Donald Trump’s threat of raising tariffs on China’s goods in response to its perceived mishandling of the virus has led to renewed concerns about the Sino-U.S. relationship. Despite this uncertainty, we expect market conditions for Asia Pacific REITs to remain positive.