AsiaPac REITs Underperformed Equities In 2020, S’pore Was Best-Performing Market
Singapore and Australian were the best performing REIT markets in 2020.
By Patrick Ma, Director, Listed Products and Research, Admiral Investments
Positive sentiment brought about by constructive global developments put financial markets at a risk-on mode in the last month of the year. The prospect of widely available coronavirus vaccines, the US bipartisan agreement on fiscal stimulus, and the EU-UK post-Brexit trade agreement’s conclusion all fuelled hopes for a more positive economic outlook.
With markets at risk-on mode, global equities climbed 4.3% in December while global REITs underperformed and rose only 3.9% during the month.
As measured by the top-100 most traded REITs, Asia-Pacific REITs performed better than their global peers with an increase of 5.7% in December. The region’s equities gained 5.8%.
Among the Asia-Pacific REIT markets, Japan and Singapore REITs rose 7.2% and 4.2% respectively, outperforming each country’s general equities. Australian REITs also performed well with a 4.3% increase in December but underperformed the Australian stock market.
In terms of sector, retail REITs were the leaders last month, with Japan Retail Fund and Fukuoka REIT and CapitaLand Integrated Commercial Trust and Fraser Centrepoint Trust in Singapore, leading the sector’s performance.
Logistica and data centre REITs jumped in 2020
For 2020, global REITs dropped 9.2%, underperforming global equities’ 16.5% gain, as the tech and clean energy sectors propelled the equity markets to new heights. REITs in the Asia Pacific showed more resilience than their global counterparts, dropping just 3.6% in 2020. However, they also underperformed the region’s equity markets.
Two standout markets in Asia in 2020 were Australia and Singapore. Both countries’ REITs were the only markets that saw positive annual performances. The Singapore REIT market was the only one that outperformed its local equity market.
Across the Asia-Pacific region, the industrial REITs such as Australia’s Goodman, Japan’s GLP J-REIT and Nippon Prologis REIT, and Singapore’s Keppel DC REIT, Fraser Logistics & Commercial Trust, Mapletree Industrial Trust, and Mapletree Logistics Trust are the clear leaders. Investors had flocked to these listed-REITs to gain exposure in logistics and data centres.
Going forward, governments around the globe are expected to maintain their loose monetary policies to prop up economies weakened by the pandemic.
As coronavirus vaccines become widely available, along with the prospects for the re-opening of borders, the region’s retail and office REITs are expected to outperform. However, an immediate return to the pre-pandemic level of economic activities is unlikely in part due to business closures and the prevailing high unemployment rate as a result of the pandemic.
On the other hand, changes caused by the pandemic, such as working from home and the emergence of online retailing will likely be more permanent and will support “anti-pandemic” plays such as logistics and data centre REITs.