China Stimulus: Driving Growth for Singapore-Listed Companies
Broker Name: CGS International Securities
Date of Report: October 8, 2024
China’s aggressive stimulus measures are setting the stage for an economic rebound, offering significant opportunities for companies worldwide. In Singapore, firms with exposure to China’s economy are especially well-positioned to benefit. This report delves into how China’s policy shifts, which aim to boost domestic consumption and economic activity, will likely create a favorable environment for Singapore-listed companies.
China’s Stimulus Measures: A Shift in Economic Strategy
In a bid to invigorate its economy, China has rolled out a series of stimulus measures designed to enhance liquidity and consumer confidence. These include a policy rate cut, a reduction in the reserve requirement ratio (RRR), adjustments to mortgage interest rates, and a reduction in downpayment requirements for second homes. Additionally, two new tools have been introduced to directly support the stock market. These measures are expected to have a gradual but positive impact on consumption, bolstering economic activity across various sectors.
The National Holiday Week from October 1-7, 2024, provided an early indicator of consumer confidence, with a 5.9% increase in domestic trips compared to the previous year and total tourist expenditure up 6.3%. This early sign of recovery bodes well for companies operating in China or those with significant exposure to the Chinese market.
Singapore Companies Poised to Benefit from China’s Growth
Several Singapore-listed companies with significant revenue or asset exposure to China are expected to be direct beneficiaries of the country’s stimulus efforts. These firms span a variety of sectors, including consumer goods, real estate, and logistics. Below are some of the key players in the Singapore market that stand to gain from China’s renewed economic vigor.
Wilmar International: Capitalizing on Food Processing Growth
Wilmar International, a major player in the food processing industry, derives 48% of its first-half 2024 (1H24) revenue and approximately 24.3% of its profits from China. The company’s mid- and downstream operations in the Chinese food market place it in a prime position to benefit from increased domestic consumption driven by China’s stimulus policies. As wealth creation in China spurs consumer spending, Wilmar is set to experience enhanced demand for its products, making it a key beneficiary of the Chinese economic revival.
Capitaland Investment: A Real Estate Powerhouse in China
Capitaland Investment is another standout among Singapore-listed companies, with 35% of its assets under management (AUM) located in China. The company generated 16% of its first-half 2024 revenue from rental income and fees tied to its Chinese operations. With China’s stimulus policies expected to boost real estate demand, particularly through better execution of existing property policies and sovereign bond issuance, Capitaland Investment is well-positioned to capitalize on this recovery in the property market.
Mapletree Logistics Trust: Riding the Wave of China’s Supply Chain Growth
Mapletree Logistics Trust, with 18% of its AUM in China, is poised to benefit from the increased economic activity spurred by China’s stimulus measures. The trust derives 19% of its revenue from China, particularly through logistics and supply chain-related services. As China’s consumption grows and trade increases, Mapletree Logistics Trust is expected to see an uptick in demand for its services, making it a key player in the logistics sector.
Hongkong Land Holdings: Real Estate Gains in China
With 33.4% of its net asset value tied to Chinese development and investment properties, Hongkong Land Holdings is set to benefit from the country’s economic turnaround. The company’s stock has already begun to experience a bullish trend, driven by investor confidence in China’s recovery. As property values rise and demand strengthens, Hongkong Land Holdings is well-positioned for sustained growth in the coming months.
Hutchison Port Holdings Trust: Ports Set for a Rebound
Hutchison Port Holdings Trust is another key player benefiting from China’s stimulus measures. The trust has recently broken out of a long-term downtrend, indicating a bullish reversal. As China’s trade activity picks up in response to the stimulus, port operations are expected to increase, directly benefiting Hutchison Port. This company’s renewed growth trajectory makes it a solid prospect for investors looking to capitalize on China’s recovery.
DFI Retail Group: Retail Sector Rebound
DFI Retail Group, which operates convenience stores in Mainland China, is well-positioned to benefit from the increase in consumer spending expected as a result of China’s economic policies. Despite some near-term challenges, DFI has shown strong signs of a bullish rebound, making it a top pick for investors seeking exposure to China’s retail recovery. As Chinese consumer confidence improves, DFI is likely to see enhanced performance across its retail operations.
Conclusion
China’s stimulus measures are not just about boosting domestic consumption—they represent a significant opportunity for Singapore-listed companies with exposure to the Chinese market. From food processing and real estate to logistics and retail, these firms are positioned to ride the wave of China’s economic revival. As the full impact of China’s policies is felt in the coming months, these companies are set to benefit, offering investors attractive opportunities for growth.
