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Tokyo Stock Exchange REIT Index 2000 recovered for the first time in 1.5 months, The decline in U.S. interest rates

THE NIKKEI via scoutAsia

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July 25, 2022 3 min read
Tokyo Stock Exchange REIT Index 2000 recovered for the first time in 1.5 months, The decline in U.S. interest rates

The market for real estate investment trusts (REITs), which operate in hotels and offices, is picking up. On July 25, the Tokyo Stock Exchange REIT Index, which shows overall price movements, recovered to 2000 for the first time in about 1.5 months since June 10, at 2001.34, up 0.15% from the previous weekend. The US longterm rate has picked up as the acceleration of US monetary tightening has been factored in and the US longterm rate is on a downward trend.

In mid-June, when fears of a rapid interest rate hike by the Federal Reserve (Fed) increased, the US longterm rate hit the 3.4% range and the REIT index plunged. The rapid rate hike concerns were then factored in, and the rate fell to the 2.7% range on July 24. In a situation of declining interest rates, there was renewed interest in REITs, which offer high yields. The recovery trend in global stock markets, which had been unstable, is also improving market sentiment.

On 25th, Frontier Real Estate Investment Corp., which invests in commercial properties, posted its highest price in nearly six years, while Healthcare & Medical Investment Corporation, which invests in facilities for the elderly, marked its highest price since listing.

Yosuke Ohata, senior analyst at Mizuho Securities, says "Hotels also firm." Among the top performers in terms of percentage change from end-2021 are Ichigo Hotel REIT Investment Corporation (+16%) and MORI TRUST Hotel Reit, Inc. In July, the number of new cases of novel coronavirus infection in Japan hovered at a record high level, but "'There has been no talk about behavioral restrictions as there has been in the past, which limits the view that it would be a burden.'" (Yosuke Ohata).

However, the recovery of top market capitalization stocks such as Nippon Building Fund Inc. and Japan Real Estate Investment Corp. was sluggish, and the index lacked momentum. Also this week, the Federal Open Market Committee in July is expected to implement a significant interest rate hike following June, and concerns about the Bank of Japan's policy revisions have not been allayed. Although there is not as much uncertainty as in June, there is still a possibility of unstable price movements if unexpected events occur, and further rise is likely to be restrained.

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The English translations provided through this service are the result of automatic and mechanical translation of contents written in Japanese and created by Nikkei or licensed by a third party, by an automatic translation system provided by a third party after certain processing of the contents by Nikkei. Nikkei disclaims all warranties, express or implied, related to the English translations, including any warranty of accuracy, reliability, validity and fitness for a particular purpose. Users shall use this service with the full understanding that it employs an automatic translation system that automatically and mechanically recognizes and analyzes information and outputs the results.