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Stocks, REITs & ETFs: SGX-Listed Asset Classes To Consider Investing In With China Loosening Its COVID-19 Measures

After what seems like decades, China is finally loosening its COVID-19 restrictions.

China recently announced 10 new containment measures for the pandemic, moving away from the zero-tolerance stance that has kept the country distanced from the rest of the world and crippled its economy.

The changes include allowing home quarantine for mild cases, and removal of testing requirements for entering most public facilities and cross-regional travel. Earlier, the country also announced a rescue package for the property sector, along with additional fiscal and monetary support.

In November, the CSI 300 and FTSE China A50 indices gained 9.5% and 12.4% respectively, reversing four straight months of decline. Hong Kong’s Hang Seng index increased by 23.2%, marking the highest monthly gain recorded since the 1998 Asian financial crisis.

With that as a background, for this week’s 4 Stocks This Week, let’s explore a couple of Singapore-listed companies, real estate investment trusts (REITs) and exchange-traded funds (ETFs) that conduct business in China and could benefit from the positive news coming out of the country.

Investing In Individual Stocks With Exposure To China

According to Singapore Exchange (SGX), Singapore has close to 100 stocks that derive at least 50% of their revenue from China.

Some of the prominent companies that have exposure include:

  • CapitaLand Investment Ltd (SGX: 9CI),
  • The three local banks DBS Group Holdings Ltd (SGX: D05), Oversea-Chinese Banking Corporation Limited (SGX: O39) and United Overseas Bank Ltd (SGX: U11), and
  • Yangzijiang Shipbuilding Holdings Ltd (SGX: BS6).

For instance, CapitaLand Investment, which sponsors a couple of REITs in Singapore as well, has 35% of its real estate assets under management (RE AUM) in China. Meanwhile, 31% of its funds under management (FUM) are in the world’s most populous country.

Performance To CapitaLand REITs: CapitaLand Integrated Commercial Trust; CapitaLand Ascendas REIT; CapitaLand Ascott Trust; CapitaLand China Trust

The real estate giant has a diversified portfolio with assets in sectors such as retail, new economy (includes business parks, industrial, logistics, and data centres), and office.

Source: CapitaLand Investment Ltd 3Q 2022 Business Update

As China re-opens further, CapitaLand Investment is likely to benefit.

Other companies that have business in China include attractions operator Straco Corporation Ltd (SGX: S85) and healthcare outfit Raffles Medical Group Ltd (SGX: BSL).

Straco owns and operates tourism attractions in China and Singapore. The company owns the Shanghai Ocean Aquarium, Underwater World Xiamen, and Lintong Lixing Cable Car attractions. In Singapore, Straco has a huge stake in the iconic observation wheel, Singapore Flyer.

Straco was badly hit by the Covid-19 outbreak. The company’s revenue plummeted from S$108.8 million in 2019 to just S$29.6 million in 2020. However, there was a slight revenue recovery in 2021 to S$41.9 million as the virus situation became slightly better. There’s more room for the company to do better with the loosening of Covid-19 restrictions.

Raffles Medical, though they make most of its money from Singapore, owns hospitals and clinics in China as well. In 2021, just 6.8% of its revenue came from China, but there’s potential for this pie to grow larger over the long run.

In Raffles Medical’s latest annual report, Dr Loo Choon Yong, its executive chairman, explained:

“Even through these challenging times, we continue to plan for the long term and invest for the future. Our growth strategy is on track, with the opening of Raffles Hospital Shanghai in July 2021. Meanwhile, Raffles Hospital Beijing and Raffles Hospital Chongqing continue to grow steadily. All three hospitals are receiving more local and international patients and we expect continued demand there for our quality healthcare services.”

As China eases up further in the future and when Singapore receives more tourists from China, companies related to the airline industry should do well.

Those tourism-related stocks include SATS Ltd (SGX: S58), Genting Singapore Ltd (SGX: G13), and Singapore Airlines Ltd (SGX: C6L).

In the third quarter of 2022, Singapore’s visitor arrivals continued to improve, with 2.2 million visitors recorded, a 77.6% increase from the same period in 2021.

However, the figure was only around 45% of the 2019 third-quarter arrivals (pre-Covid-19 levels), primarily due to the absence of international travellers from China.

As of now, outbound travel by Chinese residents for non-essential reasons is still strongly discouraged.

REITs With Exposure To China Should Perform Better

In the property sector, REITs involved in the hospitality industry such as CDL Hospitality Trusts (SGX: J85) should see an uptick in revenue, as China relaxes its border restrictions even more.

But in the nearer term, with the loosening of China’s zero-Covid policy, REITs involved in the retail sector such as CapitaLand China Trust (SGX: AU8U), BHG Retail REIT (SGX: BMGU), Dasin Retail Trust (SGX: CEDU), and Sasseur REIT (SGX: CRPU) should benefit.

As of 30 November 2022, SGX has 11 trusts that have exposure to China, as seen from the diagram below.

Source: Singapore Exchange S-REITs and Property Trusts Chartbook

Diversify Via ETFs

If you wish to get exposure to China but don’t want to pick individual companies, you can consider looking into the Lion-OCBC Securities Hang Seng TECH ETF (SGX: HST)(SGX: HSS) and the Lion-OCBC Securities China Leaders ETF (SGX: YYY)(SGX: YYR). 

The Lion-OCBC Securities Hang Seng TECH ETF seeks to replicate the performance of the Hang Seng TECH Index as closely as possible. As an investor, you should know the underlying companies that form the Hang Seng TECH Index.

For this index, it’s tech-related companies like Alibaba, Meituan, Tencent, Xiaomi, and that we will be investing into.

On the other hand, the Lion-OCBC Securities China Leaders ETF tracks the Hang Seng Stock Connect China 80 Index. This index includes the 80 largest Chinese companies in terms of market capitalisation listed in Hong Kong and/or mainland China.

This means that investors will be able to access both China A-shares as well as mainland securities listed in Hong Kong through the ETF, instead of buying individual shares from the Hong Kong Stock Exchange (HKEX), the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE).

Some of the largest companies that are part of the index include Tencent, Kweichow Moutai, Meituan, Contemporary Amperex Technology Limited, and Tencent.

Hong Kong-Listed Travel Companies That May Benefit From China’s Potential Reopening In 2023:; Cathay Pacific; Samsonite

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4 Stocks This Week is not a recommendation from us to buy or sell any of these stocks. For investors who are keen to find out more, you should continue researching about them before making your investment decisions.