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Asia Pacific REITs Up In May But Underperformed Equities In May On Covid Resurgence, Inflation Concerns

Asia Pacific REITs Up In May But Underperformed Equities On Covid Resurgence, Inflation Concerns

Singapore REITs among worst performers in the region, Hong Kong up.

By Patrick Ma, Director, Listed Products and Research

June 3, 2021 – Singapore REITs were among the worst performers in the Asia Pacific region, falling 1.7% on concerns over the resurfacing of coronavirus infections.

Generally, most REITs in the Asia Pacific underperformed their equity counterparts except for those in Hong Kong. The resurgence of coronavirus infections, spurred by new strains, wreaked havoc in various countries, most notably in India, Taiwan, Singapore, Malaysia and Australia. 

This development dampened prospects for the reopening of the region’s economy, which affected retail and hospitality-related sectors. As a result, Asia Pacific REITs rose only 0.7%.

Globally, REITs’ performance was on par with equities, up 1.5% for the month, supported by expectations of economic recovery in the US and other developed markets. 

Global capital markets primarily focused on rising inflationary pressures in May, especially those coming from the US. 

The US reported higher-than-expected inflation for April, with core Personal Consumption Expenditure (PCE) at +3.1% versus consensus +2.9%. This raised concerns about rising interest rates. 

Inflation has been a dominant theme in markets, as reflected in rising prices across a broad spectrum of asset types – from traditional equities and commodities to more recent crypto-currencies. 

Inflationary pressures also raised the possibility of an earlier-than-expected policy rate hike.

However, we expect the focus of governments and central banks to remain anchored on supporting the ongoing economic recovery. 

Against this backdrop, we remain optimistic about Asia Pacific  REITs due to the current low-interest-rate environment and rising interests in real estate assets among institutional investors.

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