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Asia Pacific REITs Underperform Equity Markets as China-U.S. Trade Talks See Progress (By Patrick Ma, Director, Listed Products and Research, Admiral Investments)

Market Update for February 2019

Asia Pacific REITs Underperform Equity Markets as China-U.S. Trade Talks See Progress

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


Asia Pacific REITs have underperformed the region’s equity indices in February, with the GPR/APREA Investable REIT Index reporting -0.4%, compared to MSCI Asia Pacific’s +1.4%. On a year-to-date basis, Asia Pacific’s REITs have also underperformed the region’s equity indices.

This underperformance was due to sustained growth by the global equity markets, with the MSCI World reporting a 3% gain for the month. Equity markets continued to feast on further monetary easing around the world, most notably in the U.S. and China. Indications of further progress on the U.S.-China trade negotiations have also helped to improve sentiment.  This surge in “risk-on” mode in the equity markets has led to underperformance in the global REIT sector.

The J-REIT sector is the only market in the region that has outperformed local equities during the month as Japan’s export sector showed some weakness. Singapore’s REIT sector has also exceeded its equity market on a year-to-date basis, as the REITs’ defensive quality remained attractive against the weak outlook for the domestic manufacturing sector (see table below).

Geopolitical issues have become dominant again. The long-anticipated U.S.-North Korea summit in Vietnam ended without an agreement. Meanwhile, the outlook for the U.S.-China trade talks, which has been oscillating between progress and disagreements, brightens lately with discussions of an imminent deal. On the other hand, a continued dovish outlook on U.S. interest rates and expectations of further policy stimulus from China should be supportive for equity markets.

As we look forward, we believe the continued soft outlook on the U.S. interest rates should be a positive for Asia Pacific’s REITs. However, we expect policy support from governments and central banks as well as geopolitical issues to drive relative performance vis-à-vis global equity markets.

REIT Index Performance Corresponding equity index Performance
Feb 2019 YTD 2019 Feb 2019 YTD 2019
GPR  250 REIT Index -0.05% 11.02% MSCI WORLD 3.06% 11.11%
GPR Aprea Investable Reit 100 Index -0.39% 7.17% MSCI AC ASIA PACIFIC 1.43% 8.37%
GPR Aprea Investable Reit Australia 1.10% 8.80% MSCI Australia 3.37% 10.82%
GPR Aprea Investable Reit Japan 1.77% 5.49% MSCI Japan -0.03% 6.07%
GPR Aprea Investable Reit Singapore -0.47% 9.96% MSCI Singapore -0.22% 5.55%

Based on market close at February 28, 2019 (GPR 250 REIT Index based on February 27, 2019)

All performance numbers are based on total gross returns in USD

Sources: GPR and Bloomberg