3 Singapore stocks that may benefit from China's massive stimulus

What happened?

China’s stock market has been a laggard for the past three years but this all looks set to change.

The Chinese government recently unleashed a raft of stimulus measures to support the economy. 

In response, Chinese stocks have staged one of their biggest rallies in years, soaring more than 20% from their lows and heading for a technical bull market.

Earlier, I shared about exchange traded funds (ETFs) that allow you to gain exposure to China. 

I also asked the Beansprout community which Singapore stocks with China exposure they would like to learn more about. 

Amongst the names that were brought up, CapitaLand Investment, CapitaLand China Trust and Wilmar appear to have garnered the most interest. 

If you are thinking of riding this wave through the purchase of Singapore stocks, I will be sharing more about these 3 stocks in this post. 

3 Singapore stocks with Chinese exposure

#1 – CapitaLand Investment Limited

CapitaLand Investment Limited, or CLI, is a global real estate manager with S$134 billion of assets under management and S$100 billion of funds under management (FUM) as of 30 June 2024.

CapitaLand Investment's share price has rebounded from a low of S$2.42 in April to reach S$3.10 as of 2 October 2024. 

The property giant reported a mixed set of results for 1H 2024 with revenue inching up just 1% year on year to S$1.37 billion.

Net profit dipped by 6% year on year to S$331 million despite the group enjoying an 8% year-on-year increase in fee-income related business revenue to S$561 million.

Core net profit fell by 14% year on year to S$296 million.

China contributed to 16.2% of CLI’s revenue for 1H 2024, slightly higher than the 15.3% contribution in the previous year.

Revenue also rose for China, increasing by 7.3% year on year to S$221 million.

In terms of EBITDA (earnings before interest, taxes, depreciation and amortisation), China’s EBITDA contribution for 1H 2024 stood at 17.6%.

CLI is advancing on its capital recycling strategy with S$1.7 billion of gross divestments to date.

Of this amount, 48% of the divestments were to external parties with 43% channelled to growing FUM in Southeast Asia and Japan.

The group is also targeting organic growth in funds along with strategic mergers and acquisitions to reach its S$200 billion FUM target.

For its lodging unit, CLI saw revenue per available unit (RevPAU) rise 6% year on year from higher occupancy and higher average daily rates.

The group signed more than 7,000 units and opened more than 5,000 units in 22 properties in 1H 2024.

Related Links:

• CapitaLand Investment Limited share price and share price target
• CapitaLand Investment Limited dividend history and dividend forecasts

#2 – CapitaLand China Trust

CapitaLand China Trust, or CLCT, is a China-focused REIT with a portfolio of nine shopping malls, five business park properties, and four logistics park properties.

CapitaLand China Trust's share price has rebounded from a low of S$0.62 in August to S$0.88 as of 2 October. 

For 1H 2024, gross revenue fell by 2.3% year on year to RMB 925.9 million due to the absence of contribution from two shopping malls.

This was mitigated by improvement for the other nine shopping malls

In Singapore dollar terms, revenue fell by 6.3% year on year to S$173 million because of a 4.2% depreciation of the Renminbi against the Singapore dollar.

Net property income fell by 8.7% year on year to S$117.9 million while distribution per unit for the REIT tumbled by 19.5% year on year to S$0.0301.

CLCT’s retail portfolio was the star attraction with a high retail occupancy rate of 97.8% as of 30 June 2024.

Both shopper traffic and tenant sales saw year-on-year increases of 14.1% and 6.6%, respectively, for 1H 2024.

CLCT’s business park portfolio saw occupancy at 90.5%, improving slightly from the 90.2% in the previous quarter but lower than the prior year’s 91.5%.

Business parks contributed 26.8% of gross rental income and CLCT is expanding its client base by targeting local and global tenants to take up space in the business parks.

The logistics parks portfolio is under pressure from a wave of new supply coming in 2024 but CLCT managed to keep occupancy at 90.3%, a sharp increase from the low of 82% reported at the end of last year.

However, this segment only made up 2.9% of gross rental income so will not move the needle much for the REIT.

• CapitaLand China Trust share price and share price target
• CapitaLand China Trust dividend history and dividend forecasts  

#3 – Wilmar International Limited

Wilmar is a leading agribusiness business with an integrated business model that includes the entire commodities value chain from origination to distribution.

The group has more than 1,000 manufacturing plants with an extensive distribution network covering around 50 countries and regions.

Wilmar's share price has rebounded from a low of S$3.00 in August to S$3.30 as of 2 October. 

For the first half of 2024 (1H 2024), Wilmar reported a mixed set of earnings.

Revenue dipped by 4.9% year on year to US$30.9 billion but net profit rose 5.2% year on year to US$579.6 million.

The agribusiness’s core net profit improved by 5% year on year to US$606.3 million.

Around 47.8% of Wilmar’s revenue came from China, with the proportion being slightly less than the 51.7% registered in the prior year.

China’s revenue also dipped by 12.1% year on year from US$16.8 billion to US$14.8 billion.

Wilmar also owns an 89.99% subsidiary Yihai Kerry Arawana Holdings Co., Ltd which is listed on the Shenzhen Stock Exchange.

Yihai Kerry’s 1H 2024 revenue fell by 7.8% year on year to RMB 109.5 billion but its net profit soared 11-fold year on year to RMB 160.7 million.

Looking ahead, Wilmar expects refining margins for tropical oils to remain depressed but demand and margins for soybean meal products should improve with lower soybean prices.

Related Links:

• Wilmar International Limited share price and share price target
• Wilmar International Limited dividend history and dividend forecasts

What would Beansprout do?

These three stocks may benefit from the raft of stimulus measures announced by the Chinese government.

CapitaLand Investment may recognise more revenue from its Chinese investments as sentiment improves.

CLCT may also see an uplift in its fortunes with the Renminbi gaining ground and improved consumer sentiment benefitting its shopping malls. With businesses seeing more money flowing in, they should also seek to expand their operations and this will help to lift occupancy rates.

Wilmar may enjoy some uplift from better results from Yihai Kerry.  

Hence, I would dive deeper into these names if I am looking for Singapore stocks that may benefit from the Chinese stimulus measures. 

Across these 3 names, CapitaLand China Trust offers the highest dividend yield of 7%, just slightly below its historical average dividend yield of 7.4%. Wilmar also offers a decent dividend yield of 5.2%. 

With a price-to-earnings ratio of 8.8x, Wilmar trades at the deepest discount to its historical average price-to-earnings ratio. On the other hand, the price-to-book ratios of CapitaLand Investment and CapitaLand China Trust are close to their historical averages. 

To gain broad-based exposure to the China market, it might be worth looking at ETFs with exposure to China too. 

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