REITs Outperform In October As Inflation Worries Weigh on Equities

Australia and Singapore REITs led performance regionally as borders re-open

By Patrick Ma, Director, Listed Products and Research

November 4, 2021 – Asia Pacific’s top-100 most-invested REITs climbed 1.8%, led by strong performance in Australia (+4.8%) and Singapore (+3.4%). 

Both countries have reopened their borders, which benefited retail and hospitality REITs. Australia’s retail REITs such as Vicinity Centres and Shopping Centres Australia, as well as smaller ones like Aventus Group and BWP Trust, led the Australian REIT market performance. In Singapore, hospitality REITs such as Ascott Residence Trust and CDL Hospitality Trust gained. 

The Asia Pacific equity market was flat, dragged down by Japan, which had election jitters. Meanwhile in China, bearish sentiment prevailed due to ongoing regulatory tightening by the Chinese government on various sectors. Asia’s poor performance was in contrast to global equities, which climbed 5.7% in October.

U.S. stock market, which gained 7%, had underpinned global equity performance. Investors focused on positive corporate earnings reports and shrugged off concerns about inflationary pressure, surging oil and commodity prices, and potential tapering by the Fed and other central banks.

Global REITs staged an even stronger performance compared to global equities with a 6.7% increase, helped by US REITs’ 8.4% gain.

Despite buoyant global equity markets, inflationary pressure is on the rise, reflected in rising energy and commodity prices. At the same time, global economic growth is decelerating due to logistical bottlenecks in global supply chains and slowing demand. Markets remained concerned about inflation and even stagflation. With inflation concerns weighing on global markets, central banks around the world will likely start to decelerate quantitative easing and/or raise policy benchmark rates. Thus, we expect Asia Pacific REITs to continue to outperform vis-a-vis the region’s equities.