Japan Rides Global REIT Rally, Driving Index to 12-Year High

(Bloomberg) -- Japan’s market for real estate investment trusts is at the highest level in 12 years as yield-hungry investors drive a global rally.

The Tokyo Stock Exchange REIT index has surged 26% this year, beating the benchmark Topix by 17 percentage points and the S&P Pan Asia REIT U.S. Dollar Index by 6 points, according to data compiled by Bloomberg.

While dividend yields have fallen to about 3.4% from 4% earlier this year, J-REITs are especially appealing in a country where a government bond maturing in 20 years offers a yield of almost zero. Rate cuts from global central banks have also made the asset class more attractive, according to Yosuke Ohata, a senior analyst at Mizuho Securities.

“For domestic investors, such as regional banks and insurers, there are no other financial products that bear such yield,” he said. “A shift into monetary easing around the world has become a turning point for the surge.”

Foreign investors may be finding J-REITs attractive after FTSE Russell announced that it will add the trusts to its global equity index, said Naoki Fujiwara, the chief fund manager at Shinkin Asset Management Co. Staged in four tranches, J-REIT inclusion will begin next September.

Other Asian nations have also seen REIT indexes soar. Thailand’s gauge has jumped 29% this year, despite the fact developers are struggling with oversupply and a slowing economy. Hong Kong is missing out on the rally amid the city’s growing social unrest.

To contact the reporters on this story: Shoko Oda in Tokyo at soda13@bloomberg.net;Shingo Kawamoto in Tokyo at skawamoto2@bloomberg.net

To contact the editors responsible for this story: Lianting Tu at ltu4@bloomberg.net, Naoto Hosoda

©2019 Bloomberg L.P.