Christopher Langner is a markets columnist for Bloomberg Gadfly. He previously covered corporate finance for Bloomberg News, and has written for Reuters/IFR, Forbes, the Wall Street Journal and Mergermarket.

Brexit wasn't that bad after all. Apart from the seven property funds in the U.K. that have halted withdrawals since the June 23 vote. The question now is whether panic could spread to Asia, where the Singapore and Hong Kong stock markets are heavily weighted toward real estate.

More than 20 percent of the value of the Singapore market is property-related, and in Hong Kong the proportion is 12 percent -- the highest such shares among major Asian markets.

Tied to the Land
Property represents one-fifth of Singapore's market cap and 12.1 percent of that in Hong Kong
Source: Bloomberg

How does that relate to the sell-off in U.K. property-related stocks and a run on commercial real estate funds? Fundamentally, not much. You could even argue that any exodus from London could benefit Singapore and Hong Kong, as Gadfly columnist Andy Mukherjee pointed out last week. The difficulty, though, is counting on rational behavior. 

For the time being, it seems to be prevailing: Singapore REITs have rallied. 

Keeping It Rational
As U.K. real-estate stocks plunged, Singapore REITs rallied
Source: Bloomberg

The pattern may not hold for long. Historically, real-estate stock indexes across the world have been highly correlated, even though each market has idiosyncratic drivers.

All Positive Here
The 55-day correlation of property-related stock indexes across the world is positive and increased in 2008 and 2011, when real estate in the U.S. and Europe, respectively, was giving investors the jitters
Source: Bloomberg

That's frustrating for investors, because in theory it makes sense to diversify across markets. Most of Europe didn't have the subprime problem that afflicted the U.S., for example. Yet when American property stocks tanked, their Old World counterparts followed. Had Greece exited the European Union in 2011, there would be little reason to expect losses on a home in Alabama -- which didn't stop U.S. developers suffering from the euro crisis. Those correlations grew with any increase in stress on either side.

In Asia this time, the situation could be exacerbated by the perception that Singapore and Hong Kong companies have been betting heavily on London real estate. That may be true for some of them -- Ho Bee Land, for example, reported that at the end of last year, 28.9 percent of its investments were in London, while Hong Kong's China Overseas Land & Investment has three of its key properties in the Square Mile.

Overall, however, real estate investment trusts and developers in both cities tend to focus at home. Which presents another challenge, unrelated to Brexit: Hong Kong home prices started trending lower this year and Singapore's have been dropping for three years.

Problems, But Our Own
Home prices in Singapore and Hong Kong are dropping, and that has nothing to do with Brexit
Sources: Centaline Property; Urban Redevelopment Authority; Bloomberg

So investors should ignore the rumblings in London and look more closely at the economic drivers at home. That doesn't mean they'll like what they see.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Christopher Langner in Singapore at

To contact the editor responsible for this story:
Paul Sillitoe at