Australian real estate investment trusts plummeted off the back of a record fall for the stock market impacted by COVID-19.
Australia's share markets suffered the largest one-day fall since 1987 on Monday. The ASX200 dropped 9.7 per cent and is now down 30 per cent from its 20 February peak.
A-REIT's opened 5.5 per cent down and closed 11 per cent down—continuing to drop at pace from a record high of 1730.40 on 20 February to 1,362.7 on 16 March.
This followed a big week in the Australian stock market with last week's "flash crash", Reserve Bank cutting the cash rate by 25 basis points to the historic 0.5 per cent as well as an economic stimulus package announced by the federal government.
The impact of a grim week was felt in the global stock market: Singapore REIT stock was valued the same as mid-2019, Hong Kong trusts generally dropped to 2015-2016 levels, some of London’s major trusts either dropped to 2019 levels or continued a downward trajectory since Brexit while the US had a mixed-bag with trade halting twice, plummeting at the start of the week and recovering slightly on Friday.
There was a coordinated global action by central banks to prevent a recession with the US Federal Reserve System slashing rates to zero, Reserve Bank of New Zealand dropping the cash rate to 0.25 per cent for “at least” the next 12 months, the Bank of England dropped their rate to 0.25 per cent last week and rate cuts were also made in Malaysia, Hong Kong, Indonesia, Philippines and Thailand.
RBA governor Philip Lowe said the bank would now implement quantitative easing; short and longer term repo operations “as long as market conditions warrant ” to provide liquidity to Australian financial markets.
“Australia's financial system is resilient and it is well placed to deal with the effects of the coronavirus. At the same time, trading liquidity has deteriorated in some markets,” Lowe said.
“In response, the Reserve Bank stands ready to purchase Australian government bonds in the secondary market to support the smooth functioning of that market, which is a key pricing benchmark for the Australian financial system.”
The RBA is in close liaison with the Australian Office of Financial Management monitoring market conditions with further policy measures to be announced on Thursday.
CommSec chief economist Craig James said just over a month ago US and the Australian sharemarket hit record highs.
“Clearly global investors under-estimated the situation. The Australian sharemarket fell for the next six sessions,” James said.
“The coronavirus outbreak has affected global economic activity especially travel, leisure, mining and energy sectors.
“Last week a number of global sharemarkets fell to levels more than 20 per cent below record highs.
“The artificial construct generally applied is that this now means that a ‘bear market’ exists.
“So while bear markets may technically exist, it is important to note that US and Australian sharemarkets are well supported by solid economic fundamentals.
“The corrections experienced on global sharemarkets have occurred in response to a ‘medical emergency’ rather than a ‘financial or economic emergency’.”
James said following the GFC it took the ASX200 just over ten years to return to record levels, following SARS it took six months, September 11 terrorist attacks took only one month and the 1987 sharemarket crash hit the All Ords which took nine years to return to record highs.