The share price has been volatile the last few days, with heavy...

The share price has been volatile the last few days, with heavy volume, for a number of reasons. First, HDN is now large enough to be included in the ASX200 (will make it next ASX/S&P rebalancing). Large managed funds are taking positions accordingly, and hedge funds are also now starting to trade HDN.

Conversely, some long-timer holders of AVN are likely selling for various reasons. The other factor to consider is inflation: it looks like it is on the way up in a big way, given energy prices, and commodities more generally. Combined, AVN and HDN properties have about 80% fixed rental annual escalations between 3% and 4%. So, only 20% is linked to CPI. If CPI exceeds 3 to 4%, HDN holders will lose out, at least until the leases are renegotiated (on average, 5 years from now HDN properties; 3.7 years AVN properties).

At the same time, 10-year government bond yields have been decreasing (worries about economic growth), which is usually a positive for an essential needs REIT with fixed rental escalations. However, high inflation and low growth imply the possibility of stagflation (a highly concerning economic possibility).

Suffice it to say, given all of the above, market sentiment is highly polarised and likely unsure of anything at the moment. It may be prudent to expect elevated volatility in the near to medium-term.