Ritz Also Has No Chance Against Interest Rate Hikes

52-Week New Lows Also Surge

[Asia Economy Reporter Kwon Jaehee] Even REITs, real estate indirect investment products that had been noted for their inflation hedge effect, could not escape the impact of rising interest rates. In the past month, they have recorded a decline exceeding the average drop in the KOSPI, and 52-week lows have been hitting one after another, showing poor performance. As concerns about an economic recession grow and investments in real asset markets become more cautious, REITs, which have high investment sensitivity, also appear to be affected.

According to the Korea Exchange on the 7th, as of 9:35 a.m., the KRX REITs TOP10 index stood at 1028.32, down 0.14% from the previous trading day. The KRX REITs TOP10 index, which was 1210.79 at the closing price one month ago, has fallen more than 13% in the past month. This is higher than the average decline rate of 12.8% in the KOSPI index during the same period. Among the 20 REITs listed on our stock market, 13 stocks, accounting for 80%, recorded 52-week lows. A total of 1.1321 trillion KRW has evaporated in the past month.

This is a completely different atmosphere compared to the first half of this year. Even in the first half of this year, REITs were attracting attention as investment products that could generate profits even in a bear market due to their low price volatility and dividend yield. However, as the trend of rising interest rates became clear, concerns grew that net income and dividend amounts would decrease due to the increase in loan interest rates taken out for real estate purchases. As a result, the average yield of REITs has fallen from the 8% range in the first half to the 6% range. There are also forecasts that this could be further adjusted downward.

Kim Misook, a researcher at KB Securities, analyzed, "As concerns about an economic recession lead to more cautious investment in the real market, investors in the REITs market, which has high investment sensitivity, seem to be moving quickly, so we lower the short-term investment preference. Although REITs are evaluated as assets with an inflation hedge function, if companies or tenants cannot endure market difficulties and proceed with lease cancellations, there is a risk of vacancy, and if asset value growth also slows down, a decrease in yield is a concern."