by winston » Mon Feb 15, 2021 1:48 pm
Asia Real Estate Report – Hitting the reset button
2020 was a challenging year for Asia real estate stocks, which saw a stark underperformance relative to their respective country’s benchmark indices.
However, 2021 appears decidedly optimistic.
We expect the sector recovery to be buttressed by the following key themes:
i) Asian economies to lead the global economic recovery, with real estate a key beneficiary of the reflation trade;
ii) hunt for yield to continue amid a low interest rate environment;
iii) robust longer-term demand drivers such as rising affluence and urbanisation rates supporting development of the real estate sector in Asia;
iv) rebound in investment volumes to help drive inorganic growth;
v) investors’ expectations are low, and valuations remain attractive.
While we are positive on the real estate sector in Asia, it would be prudent to bear in mind the risks. The path to normalcy is likely to be uneven and bumpy, and the pace of the economic recovery will largely depend on how fast Covid-19 vaccinations are rolled out globally.
We would thus look for real estate players with strong balance sheets, that are well-positioned to ride out this period of uncertainty.
Investors should also be mindful of shifting policy risks on the residential front, as governments may step in with property cooling measures in line with the need to keep housing affordable.
Following a screening of our real estate coverage universe in Asia ex. Japan, our top picks (in alphabetical order) are Ascendas REIT (AREIT SP) [BUY; FV: SGD3.89], CapitaLand Integrated Commercial Trust (CICT SP) [BUY; FV: SGD2.60], CapitaLand Limited (CAPL SP) [BUY; FV: SGD3.75], China Overseas Land & Investment (688 HK), [BUY; FV: HKD31.03], China Resources Land (1109 HK) [BUY; FV: HKD44.84], Longfor Group (960 HK) [BUY; FV: HKD54.32], Mapletree Industrial Trust (MINT SP) [BUY; FV: SGD3.51] and Sun Hung Kai Properties (16 HK) [BUY; FV: HKD145].
Source: OCBC
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