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THE ROLE OF EUROPEAN EMERGING MARKET PROPERTY COMPANIES IN A PORTFOLIO GRAEME NEWELL University of Western Sydney ALEX MOSS Macquarie Securities STANLEY.

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Presentation on theme: "THE ROLE OF EUROPEAN EMERGING MARKET PROPERTY COMPANIES IN A PORTFOLIO GRAEME NEWELL University of Western Sydney ALEX MOSS Macquarie Securities STANLEY."— Presentation transcript:

1 THE ROLE OF EUROPEAN EMERGING MARKET PROPERTY COMPANIES IN A PORTFOLIO GRAEME NEWELL University of Western Sydney ALEX MOSS Macquarie Securities STANLEY McGREAL University of Ulster and KIM NGUYEN University of Western Sydney

2 INTRODUCTION  Developed property markets  Emerging property markets  European emerging property markets  Previous research *General*Property *European property

3 PURPOSE OF PAPER  Nine (9) European emerging property markets  Listed property securities  Risk-adjusted performance  Portfolio diversification  Mixed-asset portfolios  2007-2011  Property investment implications

4 GLOBAL COMPETITIVENESS #33: Estonia#36: Czech Republic#39: Poland #40: Cyprus#45: Slovenia#46: Portugal #47: Lithuania#52: Hungary#60: Slovak Republic #61: Turkey#63: Russia#67: Romania #71: Bulgaria#77: Croatia#83: Greece

5 CORRUPTION PERCEPTION #26: Estonia#27: Slovenia#28: Cyprus #32: Portugal#41: Poland#46: Lithuania #50: Hungary#53: Czech Republic#56: Turkey #69: Romania#73: Bulgaria#78: Greece #154: Russia

6 INSTITUTIONAL GRADE PROPERTY MARKET #11: Russia (6)#18: Turkey (10)#24: Poland (14) #25: Greece (15)#30: Portugal (19)#34: Czech Republic (20) #42: Romania (21)#43: Hungary (22) #44: Slovakia (23) #46: Ukraine (24)#50: Slovenia (26)#53: Bulgaria (27)

7 PROPERTY TRANSPARENCY #19: Portugal (13)#22: Poland (16)#24: Czech Republic (18) #27: Hungary (19)#29: Greece (21)#30: Slovakia (22) #31: Russia (Tier 1) (23)#32: Romania (24)#35: Russia (Tier 2) (25) #36: Turkey (26)#40: Bulgaria (27)#43: Russia (Tier 3) (28) #46: Ukraine (29)#53: Slovenia (30)#61: Croatia (31) #70: Kazakhstan (32)#78: Belarus (33) Transparent: #19-#27 (4) Semi-transparent: #29-#53 (10) Low-transparency: #61-#78 (3) Improvements: 2001-2010

8 SECURITISED PROPERTY RussiaPolandTurkey GreeceHungaryBulgaria Czech RepublicCyprusPortugal EstoniaLatvia REITs #13: Turkey#19: Greece#21: Bulgaria

9 PROPERTY ACTIVITY: 2010: COUNTRIES #13: Russia#21: Poland#24: Turkey #27: Portugal#32: Czech Republic #35: Romania #36: Ukraine#38: Hungary

10 PROPERTY ACTIVITY: 2010: CITIES PROPERTY ACTIVITY: Q1 2011 #13: Poland#19: Czech Republic#23: Turkey #26: Ukraine#27: Romania#31: Hungary #33: Croatia#35: Russia #15: Moscow

11 EMERGING MARKETS: GLOBAL CONTEXT Listed property securities Contribution * developed: 80%* emerging 20% Emerging market contribution: regions Asia: 54%Americas: 15% ME&A: 25%Europe: 5% EPRA emerging markets index

12 EMERGING MARKETS: EUROPEAN CONTEXT Listed property securities Developed @ 93% versus emerging @ 7% Europe emerging = 1.0% global #12: Russia#17: Poland#18: Turkey Europe emerging @ EPRA emerging markets index

13 METHODOLOGY Listed property securities European emerging markets (9) Bulgaria CyprusCzech Republic GreeceHungaryPoland PortugalRussiaTurkey European developed markets (3) U KFranceSweden Stocks January 2007- April 2011: monthly total returns Risk-adjusted performance; portfolio diversification Sub-period analysis January 2007-June 2009 July 2009-April 2011

14 PROFILE: APRIL 2011 Country# of property securitiesMarket capRank Bulgaria20£ 0.2 B#5 Cyprus5£ 0.1 B#7 Czech Republic3£ 0.1 B#7 Greece8£ 0.9 B#4 Hungary3£ 0.2 B#5 Poland14£ 2.4 B#2 Portugal3£ 0.1 B#9 Russia8£ 6.5 B#1 Turkey18£ 2.1 B#3 Europe Emerging82£ 12.5 B UK146£ 40.9 B France71£ 50.2 B Sweden22£ 15.4 B

15 PROPERTY SECURITIES PERFORMANCE Country Average annual return Annual risk Risk/return ratio Bulgaria-7.74%17.43%-2.25 Cyprus-20.89%32.59%-1.56 Czech Republic-20.64%28.74%-1.39 Greece-20.85%30.23%-1.45 Hungary-6.15%21.72%-3.53 Poland-11.77%32.53%-2.76 Portugal25.90%54.36% 2.10 Russia-5.79%47.85%-8.27 Turkey16.68%27.59% 1.65 Europe emerging-2.80%34.03%-12.16 UK-18.52%29.88% -1.61 France-4.54%24.21%-5.33 Sweden-1.79%32.92%-18.37 Europe developed-11.65%24.22%-2.08

16 STOCK PERFORMANCE Country Average annual return Annual risk Risk/return ratio Bulgaria-20.43%40.43%-1.98 Cyprus-24.82%47.47%-1.91 Czech Republic-1.70%29.08%-17.06 Greece-23.80%36.31%-1.53 Hungary-0.64%28.47%-44.41 Poland-0.18%26.38%-142.64 Portugal-5.13%22.24%-4.34 Russia-0.65%34.46%-53.42 Turkey17.27%33.33%1.93 UK3.64%17.46%4.80 France-3.31%20.06%-6.06 Sweden3.46%21.69%6.27

17 DIVERSIFICATION: PROPERTY SECURITIES BULG.CYPR.CZECHGREECEHUNG.POL.PORT.RUSS.TURK.EMERG.DEVEL. BULG.1.00 CYPR.0.451.00 CZECH0.530.391.00 GREECE0.350.250.431.00 HUNG.0.570.370.530.411.00 POL.0.310.300.450.580.441.00 PORT.0.220.260.130.080.24-0.041.00 RUSS.0.450.270.460.440.350.600.111.00 TURK.0.520.250.570.520.650.670.100.601.00 EMERG.0.500.320.540.580.480.760.100.960.751.00 DEVEL.0.500.300.52 0.400.72-0.060.490.63 1.00

18 DIVERSIFICATION: STOCKS BULG.CYPR.CZECHGREECEHUNG.POL.PORT.RUSS.TURK. BULG.1.00 CYPR.0.581.00 CZECH0.690.611.00 GREECE0.620.880.731.00 HUNG.0.670.730.800.761.00 POL.0.650.580.900.700.811.00 PORT.0.570.710.690.770.720.681.00 RUSS.0.640.700.590.610.620.560.591.00 TURK.0.550.670.720.680.790.760.650.571.00

19 PROPERTY/STOCK CORRELATIONS Bulgaria: 0.70Cyprus: 0.41 Czech Rep.: 0.54Greece: 0.71 Hungary: 0.68Poland: 0.85 Portugal: 0.06Russia: 0.67 Turkey: 0.83 UK: 0.68France: 0.67 Sweden: 0.57

20 SUB-PERIOD RETURNS: PROPERTY Bulgaria:-16.68%  6.01% Cyprus:-16.82%  -26.13% Czech Rep.:-26.80%  -11.39% Greece:-15.83%  -27.22% Hungary:-14.84%  7.14% Poland: -28.65%  17.85% Portugal:22.61%  30.52% Russia:-29.29%  39.32% Turkey:-1.55%  47.11% Emerging:-21.62%  30.35% Developed:-33.66%  30.59%

21 SUB-PERIOD RISK: PROPERTY Bulgaria: 20.37%  11.79% Cyprus: 32.92%  32.80% Czech Rep.: 27.64%  30.51% Greece: 33.19%  26.17% Hungary: 25.60%  14.80% Poland: 39.35%  18.27% Portugal: 44.61%  66.45% Russia: 54.24%  36.37% Turkey: 30.46%  22.22% Emerging:40.41%  21.31% Developed:25.04%  18.47%

22 SUB-PERIOD RISK: STOCKS Bulgaria: 47.54%  26.81% Cyprus: 55.07%  35.78% Czech Republic: 33.40%  20.82% Greece: 37.23%  35.89% Hungary:32.51%  20.86% Poland: 30.79%  16.90% Portugal: 25.75%  16.39% Russia: 41.35%  19.05% Turkey: 38.20%  25.12% UK:18.38%  14.68% France:21.53%  16.75% Sweden:25.46%  13.56%

23 SUB-PERIOD PROPERTY/STOCKS CORRELATIONS Bulgaria: 0.77  0.34Cyprus: 0.49  0.29 Czech Republic: 0.63  0.41Greece: 0.68  0.79 Hungary:0.78  0.30Poland: 0.86  0.73 Portugal: 0.09  0.03Russia: 0.70  0.51 Turkey: 0.85  0.75 UK:0.57  0.84France:0.61  0.71 Sweden:0.57  0.49 Emerging property/Developed property:0.66  0.45

24 EUROPEAN EMERGING MARKET PROPERTY INVESTMENT IMPLICATIONS Size; maturity; significance Risk-adjusted returns Portfolio diversification Sub-period analysis * risk * diversification

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