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The View | 4 reasons Asia’s property will endure despite Iran war headwinds
Asian property’s sources of resilience are potent and multifaceted, with the drivers of sentiment distinct from those in financial markets
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Even before US President Donald Trump launched his tariff blitz in April last year, Morgan Stanley warned that Asia’s trade-dependent economies were particularly vulnerable to an onslaught of protectionism. The region accounted for seven of the 10 economies with the largest trade surpluses with the United States, while Taiwan, South Korea and Japan derived between 15 and 30 per cent of their corporate revenues from the US.
However, those vulnerabilities were less consequential than anticipated. Asian economies proved remarkably resilient last year, in part because tariff rates were lowered but mainly thanks to the surge in the region’s technology exports.
Fast forward almost a year, and fears about Asia’s economies have resurfaced as the rapidly escalating war in Iran increases the risk of a full-blown energy crisis. In a report on March 6, Morgan Stanley said, “Asia remains critically dependent on Middle Eastern supply of crude oil, refined products and [liquefied natural gas] and we believe the market is too complacent about supply chain risks.”
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Nomura singled out Thailand, South Korea and India as the most exposed to disruptions in energy supplies stemming from the collapse in maritime trade through the Strait of Hormuz, a vital chokepoint for global energy shipments.
In financial markets, a “shoot first, ask questions later” mentality has taken hold. Global investors sold US$11 billion worth of stocks in Asia’s developing economies excluding China last week, the biggest weekly outflow since March 2022. Investors are ramping up bets on increases in interest rates across Asia as the threat of a prolonged war fans fears about a renewed spike in inflation. Brent crude, the international oil benchmark, surged last week to now stand at more than US$100 per barrel.
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For Asia’s real estate industry, there is a palpable sense of deja vu. The sector has faced a succession of shocks in recent years, including the Covid-19 pandemic and the aggressive tightening in monetary policy.
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