Singapore Strategy: Benefiting from China’s Economic Stimulus
Broker Name: CGS International Securities
Date of Report: October 8, 2024
China’s recent stimulus efforts have sent ripples across global markets, with Singapore standing to gain from the renewed growth momentum in the world’s second-largest economy. As China implements new economic measures, Singapore-listed companies with exposure to Chinese markets are positioned to benefit significantly. The report explores how select Singapore firms can capitalize on China’s economic revival.
Singapore’s Economic Leverage on China’s Stimulus
Recent actions by Chinese policymakers, such as policy rate cuts, reduction in downpayment ratios on homes, adjustments to existing mortgage interest rates, and new stock market support tools, have fueled investor confidence. This has resulted in the Hang Seng and CSI 300 indices surging by 22% and 33% respectively over the past month. For Singapore, this growth resurgence offers a wealth of opportunities, particularly for companies with substantial revenue or asset exposure to China.
Singapore-listed companies across sectors like consumer discretionary, consumer staples, property, energy, and financials are expected to experience a boost in their performance due to this stimulus. The following companies, with significant Chinese exposure, are expected to reap benefits as China’s economy strengthens.
Wilmar International (WIL)
Wilmar International stands out among large-cap Singapore companies as a key beneficiary of China’s economic tailwinds. In the first half of 2024 (1H24), Wilmar derived 48% of its revenue and approximately 24.3% of its profits from China. The company’s food-processing operations, particularly in the mid- and downstream segments, give it a solid foothold in the Chinese market, positioning it to capitalize on rising consumer demand and improving economic conditions.
With strong ties to China’s food sector, Wilmar is strategically placed to benefit from any upsurge in consumption, particularly as the Chinese government’s stimulus policies are expected to trigger wealth creation, fostering increased spending.
Capitaland Investment (CLI)
Capitaland Investment also ranks high among the top Singapore companies set to benefit from China’s recovery. The company generated an estimated 16% of its 1H24 revenues from rental income and fees from its China operations, with 35% of its assets under management (AUM) attributed to Chinese properties. The positive impact of China’s economic policies could enhance Capitaland Investment’s financial performance, particularly as Chinese consumers and businesses benefit from lower borrowing costs and increased liquidity.
Mapletree Logistics Trust (MLT)
Another key player poised to gain from China’s stimulus measures is Mapletree Logistics Trust. MLT derives approximately 18% of its revenue from China, and 19% of its assets under management are based in the country. This logistic trust is well-positioned to leverage China’s increased economic activity, particularly in supply chains and logistics sectors, which are expected to benefit from improved domestic consumption and business investment.
Hongkong Land Holdings
Hongkong Land Holdings has deep ties to China, with 33.4% of its net asset value (RNAV) derived from development and investment properties in the country. The company has seen a resurgence in investor interest, as its stock continues to gain from the bullish trend in Chinese markets. With long-term bullish momentum indicated by technical analysis, Hongkong Land is expected to maintain its upward trajectory, making it a compelling prospect for investors seeking exposure to China’s real estate sector.
Hutchison Port Holdings Trust (HPHT)
Hutchison Port Holdings Trust, with its substantial Chinese exposure, has been a notable beneficiary of China’s economic upturn. The trust has recently broken out of a long-term downtrend, signaling a bullish reversal. As China’s stimulus measures take hold and economic activity rebounds, Hutchison Port is likely to experience further gains, particularly as port activity picks up in response to increasing global trade flows.
DFI Retail Group
DFI Retail Group is another Singapore company well-positioned to benefit from the Chinese stimulus, with direct exposure through its convenience store business in Mainland China. The company has shown strong signs of a bullish rebound, making it one of the top “Trendspotter” picks for 2024. Despite facing some near-term challenges, DFI’s strong performance outlook suggests continued growth as China’s consumer confidence improves and spending rises.
Conclusion
China’s stimulus policies represent a major opportunity for Singapore-listed companies with significant exposure to Chinese markets. From food processing to real estate and logistics, Singapore firms are poised to capitalize on the renewed growth momentum in China. With the Chinese government focused on boosting consumption and supporting the stock market, the outlook for these companies remains positive, making them attractive prospects for investors looking to benefit from the region’s economic recovery.
