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Asian reits a better bet than stocks, says report

Annual returns for such assets have grown a lot in recent years, exceeding many nation's bourses

PUBLISHED : Wednesday, 21 November, 2012, 12:00am
UPDATED : Wednesday, 21 November, 2012, 3:18am

Asian real estate investment trusts (reits) should be an essential component in a retail investor's portfolio, says a report by the Asia Pacific Real Estate Association (APREA).

The region's reits provide investors with a liquid and high-quality real estate investment opportunity to access the dynamics of the Asian real estate markets in listed real estate investment products, the report noted.

This suited the needs of general investors, said APREA, a non-profit industry association. The report, which highlights investment characteristics and benefits of Asian reits for general investors, said reits were only moderately correlated with their respective stock market performance and had a low correlation with their respective bond markets.

This is particularly important in the context of continued economic uncertainty in the US and sovereign debt issues in Europe and a relative performance advantage driven by Asia's strong economic growth expectations.

Average annual returns for Asian reits had increased significantly (except for South Korea), the report noted, and in most cases returns exceeded those of their respective stock markets and often by significant amounts.

Reits in Asia were well placed moving forward, the report added, and this positive outlook reflected the increased maturity, transparency and sophistication of the Asian real estate markets, as well as the expected increased future role of emerging real estate markets in Asia.

With 138 reits and a total market capitalisation of over US$118 billion, the Asian reit market accounts for over 12 per cent of the global market. "Reits in Hong Kong, Japan, and Singapore all have performed exceptionally well," said Peter Mitchell, chief executive of APREA.

Within the Asian region Japan accounts for 40 per cent market share of reits by market capitalisation and Hong Kong 17 per cent.