JSE’s Offshore gains spark than local property stocks

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According to statistics collated by Catalyst Fund Managers, the JSE’s offshore property players are now more attractive than local counters given the potential for further rand weakness. According to statistics collated by Catalyst Fund Managers, the JSE’s offshore property players are now more attractive than local counters given the potential for further rand weakness.

According to statistics collated by Catalyst Fund Managers, the JSE’s offshore property players are now more attractive than local counters given the potential for further rand weakness.

The wild swings in local listed property prices since mid-May are prompting investors to reassess their exposure to the sector. After strong gains of 35% in 2012, it seemed that the bull run in property share prices was set to continue well into 2013.

The JSE’s offshore-focused property stocks including Redefine International‚ Capital and Counties Properties (Capco)‚ New Europe Property Investments (Nepi) and Rockcastle Global Real Estate Company have outperformed South African-based property stocks by far for the year to date.

This could be drawn from statistics collated by property analysts Catalyst Fund Managers. Catalyst released its global listed property and South African listed property reviews detailing September returns on Thursday.

Redefine International’s total rand return which is defined as income and capital growth for January to end-September was an impressive 64.86%‚ Capco’s was 62.62%‚ Nepi was 44.72% and Rockcastle was 33.93% respectively.

The overall total return of the South African-listed property sector‚ comprising some 30 stocks with a total market capitalisation of R236.4bn‚ paled by comparison achieving a total return of only 7.33% year-to date following a sharp pull-back between May and August.

The report shows that global listed property‚ as tracked by the UBS Global Investors Index‚ showed a 21.96% year-to-date return.

Big local losers year-to-date were Fountainhead Property Trust which recorded a negative total return of 3.82%‚ Vividend Income Fund with a negative total return of 6.54%‚ Dipula Income Fund A and B units with a negative total return of 9% and 9.63% respectively‚ and new listing Tower Property Fund with a negative total return of 10.10%.

Chief investment officer at Grindrod Asset Management‚ Ian Anderson‚ said the main reason South African investors with money in these offshore stocks had enjoyed an advantage was because the rand had weakened so drastically in 2013.

He said property investments around the world were under pressure from high bond yields.

The yields of listed property and bonds are highly correlated as they are both income-generating investments and investors allocate capital between them.

“I think the key issue here is that rand weakness compared with the dollar has insulated South Africans invested in property overseas. Globally property markets are under pressure because of high bond yields so investors are selling out of property and buying government bonds. A weak rand has just protected South African investors‚” Mr Anderson said.

Catalyst MD Andre Stadler said local property stocks had lost momentum this year after a strong 2012.

He said the global property market would remain under pressure from high bond yields.

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Listed Property / REITs  |  Catalyst Fund Managers  |  Andre Stadler  |  Offshore Property Investment