Most Asia Pacific REITs Underperformed Equities In October; Australian REITs Climbed

Most Asia Pacific REITs Underperformed Equities In October; Australian REITs Climbed

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

Loose monetary policies to underpin future performance

The global capital markets continued to rally in October, helped by progress in the China-U.S. trade talks and expectations of further interest rate cuts.  During the month, the U.S. agreed to suspend its next tariff hike on Chinese imports with plans to sign an interim trade agreement with China in November. The Fed also cut its policy rate by 25 basis points at its October FOMC (Federal Open Market Committee) meeting.The MSCI World Index rose 2.6% in the month.

In the Asia Pacific region, the GPR/APREA Investable REIT Index reported a 2.3% increase in October versus the MSCI AC Asia Pacific’s 4.4% gain over the same period. Expectations for a rate cut and positive sentiments surrounding the China-U.S. trade talks spurred risk appetite for stocks. Most markets in the region saw REITs underperformed general equities except for Australian REITs, which rose 4.1% compared with a 1.7% gain in local shares. Australia’s central bank cut its policy rate to a record low, and the country’s residential property market subsequently showed signs of recovery.

We have seen a rebound in Asia Pacific equities since the beginning of the fourth quarter. The increase is supported by expectations for lower interest rates and the perceived stabilisation of geopolitical situations. We expect continued loose monetary policies across countries to contribute positively to Asia Pacific REITs’ performance.