Asia Pacific REITs Rose In May In Japan And Australia; Hong Kong Dropped 14%
By Patrick Ma, Director, Listed Products and Research, Admiral Investments
Global REITs rose less than 1% for the month and underperformed global equities
In May, REITs in Japan, Australia, and Singapore registered healthy gains, while Hong Kong REITs dropped 14% and underperformed local equities.
The China National People’s Congress passed the National Security Law for Hong Kong on May 28. While details of the law remained vague, it has already sparked a backlash from the U.S., which has said it plans to terminate its special economic and trading relationship with the territory. As the territory risks losing its autonomous status with China, market concerns over the outlook for Hong Kong and its property market have risen.
However, Hong Kong REITs’ losses were more than offset by gains in the other regions, with Japan and Australian REITs rising 7% for the month and Singapore up 6%. As a result, the GPR/APREA Investable REIT Index reported a 5% increase in May versus the MSCI AC Asia Pacific’s 2% increase. Most countries in the Asia Pacific region have seen the worst of the Covid-19 pandemic and are slowly moving towards the re-opening of their economies.
Global equity markets extended April gains last month as investors stayed positive on new rounds of lower interest rates, quantitative easing, and fiscal supports. News about the development of a vaccine against the coronavirus added to the improved sentiment.
The MSCI World Index climbed 5% last month, following an 11% increase in April. However, global REITs rose less than 1% for the month and underperformed global equities.
Throughout May, the market saw rising tension between China and the U.S. as both sides disagreed over issues including the origin of the Covid-19 pandemic, trade, and technology.
However, market worries seem to recede after President Donald Trump’s May 29 address on China and Hong Kong turned out to be milder than expected. However, tensions between the two countries will likely stay volatile and remain an overhang for global markets in the near term.
The anti-racism protests across U.S. cities now posed a challenge to the re-opening of the U.S. economy, and this adds uncertainty to the global markets. However, Asia Pacific REITs should continue to see improved sentiment as the pandemic gets under control and the region’s economies re-open for business.
