Korea Exchange unveils two REITs indices

By Lee Min-hyung

Korea Exchange building in Seoul / Courtesy of Korea Exchange

The Korea Exchange has unveiled two real estate investment trusts (REITs) indices comprised of Korea's 10-largest companies, which are investing in commercial property.

Any investor seeking stable returns during a period of lackluster stock market performance can eye REITs investments, which entail low price volatility and high dividend profitability, according to the exchange operator.

The KRX REITs Top 10 index consists of the nation's 10 biggest REITs players, including SK REITs, Shinhan Alpha REITs and E REITs KOCREF.

Their average profitability hovered well above the KOSPI 200 Index and the KOSPI between the beginning of 2021 and the end of May this year, according to the exchange. The 10 companies' stock profitability reached 24.9 percent, while the KOSPI 200 and the KOSPI suffered losses of 11.2 percent and 8.5 percent, respectively, during the same period.

"We hope the new indices will meet demand from investors who want to make REITs investments and this will help invigorate the market here," an official from the exchange said.

The exchange also released KRX REITs Top 10 Leverage index which offers twofold returns when the index goes up, but this may incur bigger losses to investors in case the index falls.

REITs are gaining attention as a safe asset, particularly at a time when stock market volatility widens. Starting from the latter half of 2021, the main bourse lost steam for additional growth amid a monetary policy shift here and abroad.

With the stock markets here and abroad entering several months of downward adjustment, investors' fears have also increased over the past few months.

As monetary authorities here and abroad are set to increase their key rates further throughout the end of 2022, demand for REITs investments is expected to rise, as it offers relatively decent dividend returns.

"Investor preference for regular dividends is rising amid global monetary tightening, so REITs will gain more of a spotlight from investors in the near future," an industry source said.

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