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The Fed raised its key benchmark rate by 75 bps in June, to 1.50%-1.75%, to combat inflationary pressures, which reached 8.6% in May, the highest level in over 40 years. Central banks in the region followed suit with hikes in Australia, Taiwan, Hong Kong, India and the Philippines noted. The hawkish stance heightened concerns about a possible US recession, which further clouded capital markets. Yields on 10-year treasuries rose above 3% to peak at 3.5% during the month before falling back. Key sections of the treasury yield curve also inverted as data on US inflation drove traders to boost bets on the pace of Fed tightening. Two-year yields rose above 10-year rates for the first time since April while five-year yields were noted to have surged as much as 17 bps above 30-year rates to record the widest spread in over two decades. Consequently, markets are pricing in a growing risk that the Fed’s bid to engineer a soft landing for the world’s biggest economy are likely to falter.
Download the Report Read MoreConcerns about inflation and slowing economic growth continued to depress capital markets in April. The U.S. reading for inflation hit 8.5% in March, the highest since 1981, recalling an era when interest rates were raised to near 20% under then Fed Chairman Paul Volcker. Markets came under pressure as escalating inflationary pressures are raising the likelihood of more aggressive rate hikes. This pushed the greenback to finish the month near two-decade highs. Monetary authorities in South Korea and Singapore also announced tightening moves. South Korea’s rate decision came after New Zealand delivered a larger-than-expected 50 basis point hike as more central banks across the region made preemptive announcements to shift their focus to fight surging inflation. The recent Covid-19 lockdown of Shanghai also led to concerns about China’s economic growth outlook and the potential for further global supply chain disruptions. With developments clouding global economic prospects, investors endured a torrid April. Total returns from Asia Pacific stocks, as tracked by MSCI, ended in the red. However, the region’s property stocks dealt with the volatility better, recording lower declines to outperform the wider equity market.
Download the Report Read MorePlease find below the rebalancing results (effective 20 June 2022 start of trading) for the:
GPR/APREA Composite REIT Index (indicated with an asterisk)
Read MoreThe Fed moved on its widely anticipated 0.25 percentage point rate hike during the month, the first increase since December 2018, signaling the start of an incremental salvo to address spiraling inflation. However, with the move largely priced in, stocks in the region remained focused on the fallout from the conflict in Ukraine, which has exacerbated inflationary pressures through rising energy and commodity prices, as well as conditions nearer home. Signs of a resurgence in the pandemic across a number of major Chinese cities and the resultant lockdowns also depressed markets. While sentiment was lifted after China tried to shore up private sector confidence after a protracted regulatory crackdown, indicating support for its real estate and internet industries, the region’s equities remained on a down trend as it slumped to its third consecutive month of losses. MSCI’s total return benchmark for the region’s equities fell close to 6% in the first quarter to underperform the region’s property sector.
Download the Report Read MoreThe region’s equities continued to struggle for direction in February ahead of the looming Fed hike. However, Russia’s incursion into Ukraine put paid to investors expectations looking to buy the dip. The conflict and subsequent sanctions heightened selling pressure, as volatility rose across global capital markets. Energy prices and commodity prices surged amid concerns on the supply of Russian oil and gas as well as agricultural produce from the region. The likelihood of even higher inflation revived fear of a 70s-style stagflation, which will drag on the fragile recovery from the pandemic. Returns from Asia Pacific equities, as measured by MSCI, fell into the red as investors sold down riskier assets. Still, with inflation racing, bond markets ended little moved as investors remained braced for higher rates, given the Fed’s resolve to anchor inflationary expectations. However, the episode underscored the resilience of the region’s REITs, which managed to eke out a marginal gain as its defensive qualities shone.
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