Malaysia REIT: First Decade Development and Returns Characteristics

International Real Estate Review (Forthcoming)

21st Annual Pacific-Rim Real Estate Society Conference, Kuala Lumpur, Malaysia (January 18-21, 2015)

37 Pages Posted: 26 Jan 2015 Last revised: 12 Apr 2015

See all articles by Yuen Meng Wong

Yuen Meng Wong

University of Malaya (UM) - Faculty of Business & Accountancy

Date Written: April 9, 2015

Abstract

Real estate investment trust (REIT) is a niche alternative investment. Since its introduction in Asia at the turn of the millennium, the REIT market in the region has experienced phenomenal growth. In particular, the Malaysia REIT (M-REIT) market capitalisation has seen a spectacular growth of close to 20 folds from its inception in 2005 until end of 2013. This paper chronicles the development of the M-REIT market which is rather unique as it provides a common platform for the existence of both conventional and Islamic REITs. Empirical tests are also conducted to uncover the returns characteristics of the M-REIT market. M-REIT returns are significantly correlated with domestic stock markets but only weakly correlated with changes in interest rate, with long-term proxy having stronger impact than short-term proxy. The results from correlation analysis are further confirmed by regression testing which shows that M-REIT returns are most significantly driven by domestic stock market returns while only mildly by changes in interest rates and are not significantly driven by returns in regional REIT markets. These findings possibly imply that M-REITs (i) subscribe more to equity characteristics than bonds, (ii) are not ‘pure’ yield-play instruments, (iii) often regarded as long-term investment and (iv) may not be fully integrated with global and regional REIT markets.

Keywords: REIT, Malaysia, REIT returns, interest rate, equity and REIT

JEL Classification: G39

Suggested Citation

Wong, Yuen Meng, Malaysia REIT: First Decade Development and Returns Characteristics (April 9, 2015). International Real Estate Review (Forthcoming), 21st Annual Pacific-Rim Real Estate Society Conference, Kuala Lumpur, Malaysia (January 18-21, 2015), Available at SSRN: https://ssrn.com/abstract=2555174 or http://dx.doi.org/10.2139/ssrn.2555174

Yuen Meng Wong (Contact Author)

University of Malaya (UM) - Faculty of Business & Accountancy ( email )

Jalan Lembah Pantai
Kuala Lumpur, Wilayah Persekutuan 50603
Malaysia

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