Looking back, the defining characteristic of 2018’s equities market is probably the fact that geopolitical influence on market performance. The escalation of trade disputes between China and the US since 2Q18 affected both the capital markets and the real estate markets. MSCI Asia Pacific had been down 9.4 percent in 2018, and 16 percent down from its peak in January 2018.
Since its formal adoption into the Uniform Prudent Investor Act of 1992, the Prudent Investor Rule (PIR) has been adopted by many institutional investors around the world. One central tenet of the PIR is that investors should diversify their holdings. Within the real estate world, this typically means a diversification into different geographies and asset classes.
In US Dollar term, Japan and India are the only two Asia Pacific market indices that have positive year-to-date performance as of the end of August. Granted, negative short-term newsflow was not helpful to emerging markets. For example, the China and Hong Kong markets had a weak summer because of the overhang of the potential US-China Trade War. And currency weaknesses in Venezuela, Turkey, Indonesia and Malaysia have also contributed to the gloomy investment landscape.
The Hong Kong Book Fair, which takes place in July every year, is the major publishing event of Hong Kong. Last year, my first book on REITs was fortunate to have won a publishing award at the Book Fair’s Hong Kong Biennial Award.
When Australia’s Property Funds Association held its annual meeting in April, the conference title was “New Horizon: Exploring property opportunities”. As traditional real estate classes have rallied in the last several years, some institutional investors and their real estate asset managers are now looking to invest in other real estate classes, such as student housing, multifamily, and healthcare. These alternative asset classes provide additional yield, but more importantly, they have the ability to become institutionalised over the next investment cycle.
As we have discussed in this column several months ago, Singapore’s real estate market seemed to have turned the corner in 2017. The enbloc transactions of residential projects suggest that developers are interested in accumulating their land bank again, and the early signs of office rental increases suggest that the general real estate market has reached an equilibrium point. As such, we have suggested that REITs and other forms of real estate may begin to see positive performance in 2018.
After the US published surprisingly robust data for unemployment and hourly wages in early February, the global stock market recorded a quick sell-off. At its trough, the Strait Times Index had a month-to-date fall of 4.5 percent, and other markets, especially the Greater Chinese bourses, had sharper falls. Hong Kong, for example, recorded its sharpest weekly fall in history when the Hang Seng Index fell by about 10 percent. In Hong Kong, the fall has since then been nicknamed the “Black Week”.
Even though the current interest rate upcycle started in December 2015, the current interest rate environment remains benign. As of January 2018, there have been five increases, and the market expects another three increases this year. The long end of the curve, measured by the 10-year US government bond rate, likewise, is still benign and below the 2014 peak, even after the increase observed this month.
As of October 31, 2017, Asia Pacific REITs have recorded a total return of 5.3%. Among the four major REIT markets, Singapore has the best performance, returning 22% in local dollar terms. It is often said tha...
By Victor Yeung The latest economic numbers show that inflation in the United States remains benign. After Hurricane Harvey has disrupted the oil refining hub in Texas, oil prices have risen by more than 15%. ...