SA Listed Property Index recorded a negative 2.98 total return for the month ended 31 January 2016

Posted On Monday, 08 February 2016 14:47 Published by
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According to Catalyst Fund Managers, the SA Listed Property Index (SAPY) recorded a negative total return (-2.98) for the month ended 31 January 2016.

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The yield to maturity (YTM) on the Long Term Government Bond Index strengthened by 58 bps to end the month at 9.19% (9.77% - 31 December 2015). The SAPY historic yield ended the month at 6.32%. Excluding non-dividend paying and 100% offshore earnings focused companies, the historic yield of the SAPY is 7.33%. 

SA Bonds recorded the highest total return of 4.57% for the month. SA Cash (0.52%), SA Listed Property (-2.98%) and SA Equites (-2.99%) were the next best performing asset classes. For the last 12 months SA Cash recorded the highest total return (6.47%), followed by SA Equites (-1.06%), SA Listed Property  (-2.42%) and SA Bonds (-5.64%). 

The South African Reserve Bank was caught between a rock and a hard place this month. The monetary policy committee was faced with the continuing dilemma of a deteriorating inflation environment and a worsening GDP growth outlook. The MPC decided to raise interest rates by 50bps on fears of inflation breaching the upper end of the target band of 3%-6%. This will likely come at the expense of economic growth, which is already forecast to be below 1% for the year ahead.

Investec Australia Property Fund announced a rights offer during the month, with the intention to raise approximately R690m, at a price of R11.58 per Right’s offer unit at a ratio 23.55 per 100 units held. Redefine International announced a potential placing to be held in February, to raise a minimum of £100m. 

“As we approach results season, Resilient and Fortress (B-units) have issued trading statements guiding to 24%-26% and 95%105% higher growth respectively, for the six months period ended 31 December 2015”, Catalyst Fund Managers said.

The SA REIT sector has historically been highly correlated to long bonds, which have risen over the last 12 months. There are several headwinds facing the local and global economy and we thus remain cautious in the short to medium term, as real estate returns are likely to take their direction from capital markets rather than real estate fundamentals. Over the long term, real estate fundamentals will drive performance.          

 The FTSE EPRA/NAREIT Developed Rental Index recorded a net total USD return of -3.34% in January. The best performing listed real estate market was Japan, which recorded a total USD return of 2.39%. The UK recorded the lowest total USD return for January of -9.28%. The SA Listed Property Index (SAPY) recorded a total ZAR return of -2.98% for January.

Continuing concern about collapsing commodity prices and a slowdown of growth in China weighed heavily on asset prices in Asia. Property companies with exposure to China and outbound Chinese tourist demand, like Global Logistics Properties and Wharf Holdings, lost significant value during the month, -21.8% and -16.3% respectively.

The Bank of Japan’s unexpected decision at the end of the month to introduce negative interest rates on a portion of bank deposits caused a significant jump in the performance of Japanese real estate companies. The South African Reserve Bank raised interest rates by 50bps on fears of inflation breaching the upper end of the target band of 3%-6%.       

Catalyst Fund Managers won two awards at the prestigious Raging Bull ceremony hosted by Personal Finance on Wednesday 27th January 2016.

The Catalyst Global Real Estate UCITS Fund won the award for the best (FSB approved) Offshore Global Real Estate Fund on the basis of risk-adjusted returns. The Catalyst Global Real Estate Prescient Feeder Fund won the award for the best (SA Domiciled) Global Real Estate Fund.

Last modified on Monday, 08 February 2016 15:50

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