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Asia Pacific REITs Up in January But Underperformed Equities

Asia Pacific REITs Up in January But Underperformed Equities

Asian REITs also underperformed global REITs as Japan REITs fell on strong yen.

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

Feb 2, 2023 – While global REITs climbed 9.2% in January and outperformed equities, Asia Pacific REITs, as measured by the top 100 most traded REITs, gained just 4.8%, dragged lower by J-REITs.

Global capital markets started the year on a strong note due to expectations of peaking inflation and interest rates. The 10-year U.S. treasury yield dropped from 3.879% at end-2022 to 3.529% by January 31st. Global equities rose 7% in the first month of 2023. However, global REITs outperformed after US and UK REITs staged a strong comeback.

Asia Pacific REITs rose 4.8% in January but underperformed the region’s equities. Rising Chinese shares on the back of China’s reopening contributed to gains in Asia Pacific equities.

The region’s REITs were dragged lower by Japan REITs, which dropped 2% during the month and significantly underperformed Japan equities and other countries’ REITs. A strong yen and increased expectations of Bank of Japan’s reversing its ultra-loose monetary policy led to the weak performance. The only exception was hotel REITs, which saw rallies on the back of expectations of Chinese tourists returning following the mainland’s re-opening. Japan Hotel REIT Investment, Invincible Investment and Hoshino Resorts REIT rose 6.1%, 8.4% and 5.1%, respectively, during the month. 

Elsewhere, Australia, Singapore and Hong Kong REITs jumped 8-10% during the month. Goodman Group led gains among Australian REITs with a 15% rise. Singapore’s Keppel DC REIT and Digital Core REIT also rose 15% as industrial and data centre REITs gained investors’ favour after a weak 2022 performance. Hong Kong’s Link REIT rose 9% as investors anticipated a re-opening of China-Hong Kong borders to benefit Hong Kong retail sector.

The U.S. Federal Reserve’s most recent decision to raise the Fed funds rate by an expected 25 basis points to 4.5%-4.75%, is seen as a dovish move that signalled slowing inflationary pressure. This is despite expectations of another rate hike in March. On the back of easing financial conditions, global REITs’ performance should stay strong.

Based on market close at January 31, 2023
All performance numbers are based on total gross returns in USD
Sources: GPR and Bloomberg