Report - Nikko AM Asia Limited

the back of structural reforms and changes in tax policy. From a fundamental perspective, we feel that:
(i) Grade A office vacancy should continue to improve through the year, (ii) small business sentiment
continues to improve and it should drive demand and for Grade B office, and (iii) High Quality Industrial
space should continue to see stable demand. Also, we expect additional infrastructure spending over the
next few years for the 2020 Summer Olympics. Furthermore, we expect multiple primary and secondary
offerings in the JREIT space.
Continue to be sanguine on the Asian REITs
With the onset of the Quantitative Easing, we believe that investors will eventually form a better idea of
where long-bond yields will settle in the US and Asia. Our view remains that in an environment where
bond yields are rising due to stronger growth expectations, Asian REITs are likely to see healthier rental
income, which should more than offset the effect of any increase in interest payments. This is especially
so in the more cyclical real estate sectors, including office and hotels. We continue to believe that there is
room for compression in the spread between REITs yields and long-bond yields, as investors gain greater
visibility on the final impact of tapering on bond yields, and also the benefits of a healthier economic
environment. We are now marginally underweight on the Asia-Pacific ex-Japan region as we added to
ideas in other regions. Within the Asia-Pacific ex-Japan region, we remain overweight in Malaysia, Hong
Kong and Singapore, and underweight in Australia.
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