A prolonged property slowdown in China is one of the biggest risks financial markets face this year, but there's one sector that may be immune: Asian real-estate investment trusts (REITs).
Declining real estate activity in the world's second-largest economy could create more opportunities for acquisitions as mainland developers look to sell assets amid falling prices and tepid demand, thus boosting the REIT market, said Victor Yeung, chief investment officer at Admiral Investment.
The acquisition of a Shenzhen shopping mall by Hong Kong's Link Real Estate Investment Trust, Asia's largest REIT, is one such example. While details of the purchase haven't been released yet, Standard Chartered believes the deal will undoubtedly boost Link REIT's stock valuation.
"People may not recognize this, but half of the growth of REITS on average comes from management actions, such as mergers and acquisitions (M&A) and other forms of development and restructuring," Yeung told CNBC on Tuesday.
REITs in Hong Kong and Singapore are waiting for such acquisition opportunities, he said, which are likely increase their market cap significantly. "Much of the outperformance of our fund in 2014 came from identifying these [acquisition] opportunities. For 2015, this will also be the story," he noted.
Furthermore, private equity funds with a vintage of 2007 or 2008 are coming towards the end of their fund lives and many are actively looking for an exit, Yeung said, adding that REITs or a portfolio sale to an existing REIT can be desirable options.