Global Stock Markets Hit by 'Stagflation' Fear, Safe Haven REITs... Taiwan and Hong Kong Struggle, Korea Tops Even the US

[Asia Economy Reporters Lee Seon-ae and Lee Myung-hwan] The global stock markets are treading on thin ice, weighed down by fears of stagflation (economic slowdown amid rising prices). Although volatility is increasing with sharp declines, the story changes when the stage shifts to the REITs (Real Estate Investment Trusts) market. While market optimism has all but disappeared, REITs are emerging as a safe haven in an era of inflation and stagflation. As global capital concentrates on REITs, Korean REITs stand out with the highest returns.

Korea’s Returns Are Unrivaled

According to financial information provider FnGuide, independent investment research firm Morningstar covering North America, Europe, Australia, and Asia markets, and ETF Global, among ETF asset classes, real estate ETFs posted the highest returns over the past year. While equity ETFs recorded -1.5% and bond ETFs -8.12%, real estate ETFs boasted an overwhelming 9.65% return. The same trend holds for the three-month period: equity and bond ETFs returned -3.38% and -6.31%, respectively, whereas real estate ETFs achieved a 5.53% return. This is attributed to demand for inflation hedging and stable cash flow generation.

Among major countries, Korean REITs’ returns are outstanding. Japan, Singapore, Taiwan, and Hong Kong posted one-year returns of -1.67%, -2.87%, -9.51%, and -8.11%, respectively, essentially performing poorly. Only the U.S. showed a decent 11.59%, but Korea surpassed this with an 18.81% return. The three-month figures follow the same pattern, with Korea leading at 8.24%.

FnGuide’s Quant Division Index Research Team analyzed individual REIT ETF returns and found that products with high investment proportions in Japan and Hong Kong underperformed, while those with significant U.S. exposure benefited from a strong U.S. housing market and posted positive returns. They also noted that Korea ranked high due to excess demand in the housing market.

REITs Rise as Domestic Stocks Slip

While the domestic stock market has been falling amid overlapping negative factors, REITs delivered stable returns. An analysis of 19 REITs listed in the domestic market showed an average return of 8.16%. Comparing closing prices from January 3, the first trading day of the year, to January 28, seven REITs posted returns exceeding 10%, with only two experiencing losses during this period.

Compared to the KOSPI’s 10.42% decline due to the Ukraine war and the U.S. Federal Reserve’s tightening, these returns stand out. When compared to sector indices, only the KOSPI Steel & Metals Index (12.26%), which surged benefiting from the war, and the KOSPI Insurance Index (10.38%), a beneficiary of interest rate hikes, outperformed the average REIT returns.

Mirae Asset Global REIT led with a 20.22% return. Coramco The One REIT, listed on January 28, followed closely with a 19.22% return. Other notable performers included Aegis Residence REIT (15.68%), Shinhan West TND REIT (15.26%), and iREIT KOREA CREB (13.30%).

Meanwhile, the scale of REIT investments is growing. The market capitalization of REITs increased from KRW 7.4146 trillion on January 3 to KRW 8.5073 trillion on January 28. Even excluding Coramco The One REIT, which was unlisted at the start of the year, market capitalization rose 11.22% to KRW 8.2467 trillion. Trading volume and value also surged significantly. Daily trading volume rose 61.19% from 2,825,583 on January 3 to 4,554,674 on January 28. Daily trading value increased 84.93% from KRW 15.315 billion to KRW 28.322 billion during the same period.

This content was produced with the assistance of AI translation services.