Wary investors turn off higher-yielding sectors
Real estate investment trusts were battered on Friday as investors appear to be turning away from the higher-yielding sectors.
The S&P Property Index was off 1.8 per cent in late trade, with Mirvac down 2.1 per cent, Investa Office down 3 per cent, Goodman Group down 3.6 per cent and GPT Group down 2.9 per cent.
Traders said the overall theme was that the fears of US rate hikes had spread into the US REITs - as investors ditched property for higher-yielding bond rates.
The theory is higher rates hit mortgages, which in turn hit household spending - not good for retail landlords or residential developers. This negative sentiment has winged its way around the globe to the Australian REIT sector.
Even so, in coming weeks, the REIT sector will go ex dividend, which will generate close to $2 billion that will wash through the market as investors are paid the dividend.
It is expected most of the cash will be re-invested to the REITs, with some also going to speculated capital raisings.
Already, up to $1 billion has been raised from institutional placements and more are tipped as the REIT sector looks for more deals in the new financial year.
In the past few years, at least half of the cash has been invested elsewhere, such as cash or the higher-yielding mining sector.
This comes as the REIT sector has emerged from the shadows of the past few years of no growth to be one of the best performers over the past year, in terms of investor returns.
That was highlighted by the spate of final distribution notices released in the past week in the lead-up to the end of the 2013 financial year, all of which were in line and higher than market expectations.