Report - Nikko AM Asia Limited

At the end of June, the Japanese currency weakened to 99 Yen/USD compared to 79 Yen/USD a year
ago. Given all these positive changes, Japan has seen three consecutive quarters of economic expansion.
Tokyo office vacancies, which hit 9.43% at end June 2012 (the highest level seen in the last five years)
has dropped by nearly 100 bps to 8.46% at end of June 2013. Companies have successfully raised
capital in both primary and secondary offerings. Some notable new firms are Nippon Prologis REIT, GLP
J-REIT and Nomura Real Estate Master Fund.
Australian REITs gained as interest rates were cut
Australian REITs (A-REITs) gained 17.4% in AUD terms during the twelve month period, according to
the S&P/ASX 200 A-REIT Index. A-REITs underperformed Australian general equities in 2H2012 by 2.1%
on a total return basis. Over that period, the Reserve Bank of Australia (RBA) cut its cash rate by 50bp
to 3.00%. While GDP growth remained steady, employment growth remained patchy. In March 2013,
the Australian economy shed 36,000 jobs, worse than expectations of a 7,500-job loss. The following
month saw the central bank cut its cash rate by 25bp to 2.75%. However, the 10-year government
bond yield rose by 26bp in tandem with global comparables. 1Q2013 GDP grew 0.6% QOQ, slightly
weaker than expectations, while employment grew by 1,000 jobs, better than expectations of 10,000-
job shrinkage. Recent developments included Mirvac having raised AUD400m in equity to fund the
AUD584m acquisition of seven office assets from General Electric. Stockland raised AUD400m in equity
to fund its development pipeline. Federation Centres sold 50% stakes in six retail assets for UAD602m,
while Charter Hall Retail REIT entered into a conditional contract to sell five assets in Poland for EUR175m.
Hong Kong property stocks climbed home prices gained
Hong Kong property stocks climbed 15.6% in HKD terms during the twelve months under review,
according to the Hang Seng Property Index. In 2H2012, office rents continued to diverge, according to
the HK Rating and Valuation Department, rising in decentralized locations while staying unchanged in
Central and Sheung Wan. Retail rents continued to grow, but at a slower pace. At the start of 1H2013,
home prices reached a new high which led to new measures to cool the property market in February,
including higher stamp duties and tighter lending rules. In April, new regulations governing sales and
marketing procedures in detail were implemented. New launches were seen to be temporarily deferred
as developers adjusted to the new rules. In June, the government announced that developers will be
allowed to pre-sell residential projects 30 months prior to completion, from 20 months previously. In
company news, China Overseas Land won the tender for two residential sites at Kai Tak for the total of
HKD4.54b, at the upper end of expectations. The sites were the first two to be used for building homes
solely for Hong Kong residents.
Singapore property stocks rose despite cooling measures
Singapore property stocks rose in the twelve months under review, with the FTSE ST Real Estate Index up
14.9% in SGD terms. In 2H2012, office rents in Singapore eased 0.4% while retail rents eased 0.1%,
according to the Urban Redevelopment Authority. Industrial rents gained 5.1%. Hotel RevPAR was broadly
stable and private home prices gained 2.5%, with new home sales remaining brisk, despite several
rounds of cooling measures. In January 2013, the government announced a slew of further tightening
measures, including higher buyer stamp duties, tighter mortgage rules, additional restrictions on public
housing and ECs, and the introduction of a seller’s stamp duty for industrial properties. According to the
Urban Redevelopment Authority, private home prices rose 0.6% QOQ in 1Q2013, slower than the 1.8%
increase in 4Q12. Office rents eased 0.2%, retails rents declined 0.6% and industrial rents rose 0.4%
QOQ. The Singapore Tourism Board reported that visitor arrivals to Singapore grew 6.4% YOY to 3.81m
in 1Q2013, and that Singapore hotel RevPAR fell 4.7% YOY to SGD214.10 in April 2013. In June, the
Monetary Authority of Singapore introduced new limits on property loans. In recent real estate news,
Ascendas Hospitality Trust issued 226.4m new stapled securities, raising more than SGD200m. Keppel
REIT’s largest shareholder Keppel Corp completed a dividend-in-specie of 361.3m units or a 13.5% stake
in Keppel REIT units to its shareholders, and sold 180m units or a 6.7% stake in Keppel REIT to Goldman
Sachs.
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