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Global Equities Relief-Rally Led To Asia Pacific REITs’ Underperformance In September

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

Global Equities Relief-Rally Led To Asia Pacific REITs’ Underperformance In September

REITs could see support in October on expectations for cuts in interest rate.

Global capital markets cheered after the U.S. Fed cut its benchmark rate by 25 basis points (bps) and trade talks between China and the U.S. showed signs of progress. The MSCI World rose 2% for the month on the back of improved market sentiment.

For the Asia Pacific region, the GPR/APREA Investable REIT Index reported a 0.6% increase in September versus MSCI AC Asia Pacific’s 2.7% gain over the same period. The marginal rise in the REIT Index reflected the risk-on sentiment in the Asia Pacific markets. 

Australian REITs led the underperformance of regional REITs with a 2% drop during the month.  The MSCI Australia index was up 2%. This decline in the REIT index is a result of market concerns about Australia’s economic outlook and its impact on the local property market. 

REITs in Japan registered the best performance with a 2.9% increase. J-REITs, however, still underperformed the MSCI Japan, which rose 4.2% during the same period.

Despite the September rebound, concerns about the global economic outlook have re-surfaced after worse-than-expected U.S. PMI (Purchasing Manager’s Index) data released on October 1. The market largely expected governments to keep interest rates low. The Reserve Bank of Australia recently cut its interest rate by 25 bps cut to a record low of 0.75%. 

Thus, we expect Asia Pacific REITs’ outperformance to return in October on the back of concerns over the global economic outlook and lower interest rate expectations.

Based on market close at September 30, 2019

All performance numbers are based on total gross returns in USD

Sources: GPR and Bloomberg