Too Exhausted? ... Weakened Ritz Faces Short Selling Assault as Well

Listed REITs Yield on the Decline
Short Selling Offensive Amid Stock Price Drop

[Asia Economy Reporter Ji Yeon-jin] Domestic listed REITs (Real Estate Investment Trusts), which had shown a steady upward trend since the beginning of the year, are now on a downward path. They had attracted attention as an inflation 'hedge' tool amid concerns over rising interest rates, but as expectations for economic recovery sparked a full-fledged bull market, investor interest seems to have waned.

According to the Korea Exchange on the 15th, IREITs Corporate K-REITs recorded a stock return of -8.85% over the past month since June 11. This stock rose 26.80% from 1,450 KRW at the end of last year to 6,960 KRW on June 9, but has been declining since. Lotte REITs, the leading REIT by market capitalization, also fell 3.26% over the past month after hitting a yearly high of 6,250 KRW on June 3. During the same period, Shinhan Alpha REITs dropped 6.41%. ESR Kendall Square REITs and Macquarie Infrastructure also fell by 1.75% and 2.77%, respectively. Only KORAMCO Energy REITs rose 1.82%, but this stock has been sideways since reaching 6,290 KRW on June 9.

Most of these stocks showed a slow recovery after a sharp decline due to the COVID-19 impact last year, then experienced a steep rise starting in March. The KOSPI, which had a strong rally at the beginning of the year, remained in the 3,000-point range amid growing concerns over inflation-driven interest rate hikes. However, the KOSPI recovered from the 3,100 range at the end of May to the 3,200 range in early June and has been fluctuating around 3,300 since late June. This was thanks to the U.S. Federal Reserve (Fed) calming inflation concerns by stating that there would be no early rate hikes due to rising prices. Accordingly, investors appear to have shifted their preference from stable dividend income to higher-risk assets, causing REIT investments to lose momentum.

As stock prices fell over the past month, short selling attacks have intensified. On the previous day alone, short selling transactions for Lotte REITs amounted to 1.9 billion KRW, with a short selling ratio of 25.41% relative to trading volume, ranking fourth in short selling ratio on the KOSPI. Short selling ratios for Shinhan Alpha REITs were 20.97%, IREITs Corporate K-REITs 16.66%, ESR Kendall Square REITs 11.09%, and Macquarie Infrastructure 11.0%, all placing these stocks within the top 50 for short selling transactions.