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REITs losing steam in Korea


By Lee Min-hyung

Indirect investment in real estate stocks is rapidly losing steam after becoming a sensation in 2019 in the local equity market.

Last year real estate investment trusts (REITs) were incredibly popular, with most major REITs enjoying a steep rise in their valuation.

But since the start of 2020, their stock prices have seen a rapid decline, even though no external risk factors have been detected.

The price of Shinhan Alpha REIT, one of the top-tier firms in the industry, fell to as low as 7,100 won ($6.15), at one time Tuesday on the Seoul bourse. This is an outstanding decline in that the stock was traded at as high as 9,440 won in November.

Shares of NH Prime REIT, which joined the bandwagon by going public in December 2019, fell below 5,700 won as of Tuesday. This is a drop of more than 12 percent from the closing price on Dec. 5 when the firm went public on the benchmark KOSPI.

Market experts said the decline has yet to reach a worrying level, as they view the recent drop is a sign that the stocks have reached an adjustment period after their steep rise last year.

"REITs stocks have entered a price adjustment period, after their valuation surged following their initial public offerings," Hwang Sei-woon, an economist at the Korea Capital Market Institute, said.

He pointed out that it is natural for such new market players to suffer from sudden drops in their stock valuation.

The expert also said it remains to be seen whether they will bounce back soon, as the real estate market fluctuates in line with external economic conditions.

"We need to see if the real estate market will be able to regain vigor this year," he said.



By Lee Min-hyung

Indirect investment in real estate stocks is rapidly losing steam after becoming a sensation in 2019 in the local equity market.

Last year real estate investment trusts (REITs) were incredibly popular, with most major REITs enjoying a steep rise in their valuation.

But since the start of 2020, their stock prices have seen a rapid decline, even though no external risk factors have been detected.

The price of Shinhan Alpha REIT, one of the top-tier firms in the industry, fell to as low as 7,100 won ($6.15), at one time Tuesday on the Seoul bourse. This is an outstanding decline in that the stock was traded at as high as 9,440 won in November.

Shares of NH Prime REIT, which joined the bandwagon by going public in December 2019, fell below 5,700 won as of Tuesday. This is a drop of more than 12 percent from the closing price on Dec. 5 when the firm went public on the benchmark KOSPI.

Market experts said the decline has yet to reach a worrying level, as they view the recent drop is a sign that the stocks have reached an adjustment period after their steep rise last year.

"REITs stocks have entered a price adjustment period, after their valuation surged following their initial public offerings," Hwang Sei-woon, an economist at the Korea Capital Market Institute, said.

He pointed out that it is natural for such new market players to suffer from sudden drops in their stock valuation.

The expert also said it remains to be seen whether they will bounce back soon, as the real estate market fluctuates in line with external economic conditions.

"We need to see if the real estate market will be able to regain vigor this year," he said.


Lee Min-hyung mhlee@koreatimes.co.kr


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