Business / Financial Markets

South Koreans shun Japan's products but not its 27% REIT investment returns

Bloomberg

While some in South Korea have been boycotting Japan, they seem to draw a line at financial products that generate high returns.

While many Koreans have ceased buying everything from beer to cars to clothing from Japan, and have canceled trips there amid an ongoing trade spat and disagreements over historical issues, they have flocked to the nation’s real estate investment trusts, or REITs.

Korean investors’ holdings of Japanese REIT funds have quintupled from the start of the year to about 291 billion won ($248 million), according to data from investment information provider KG Zeroin Co. They’ve bought a net 60 billion won this month, which is set to log the biggest monthly inflow this year.

And the hunt for better investment returns is, in turn, fueling enthusiasm for the Japanese property market.

The Tokyo Stock Exchange REIT index has gained 27 percent this year, at a time when a sharp slowdown in Korean economic growth and trade conflicts have weighed on the country’s shares.

“J-REIT funds have had a steady, solid performance and that’s attracting investors struggling to find an attractive place to park their money amid global volatility,” said Yongsik Park, a fund manager at Samsung Asset Management Co., the country’s biggest money manager with 256 trillion won of assets.

Japanese REITs have been surging as the Bank of Japan’s ultra-easy policy continues to support the property market, and as expectations rise for increased foreign demand for the trusts after FTSE Russell announced it will add them to its global equity index.

Korean investors’ net purchases of Japan REIT funds have totaled 232 billion won this year as of Oct. 21, compared with net sales of 13 billion won last year and purchases of 15 billion won in 2017, according to Zeroin data.

Samsung Asset said its J-REIT funds have grown almost 10-fold this year, with 120 billion won of assets under management.

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