China poised to drive economic growth

IT has been over a year since China lifted Wuhan's lockdown. The world's second largest economy announced an 18.3 per cent expansion in gross domestic product (GDP) for the first quarter of 2021 from a year ago. Growth was driven by strong domestic retail sales and exports.

China's retail sales rose 34.2 per cent year on year (yoy) in March, higher than the 33.8 per cent increase in the first two months of 2021. Exports data announced last Friday showed 32.3 per cent yoy growth in April, exceeding analysts' forecasts. With effective Covid-19 containment measures, the International Monetary Fund (IMF) forecasts China's 2021 GDP to expand 8.4 per cent.

The FTSE ST China Index is up 15.2 per cent in the year to May 6.

Among Singapore's listed Reits and property trusts are 10 with exposure to properties in China across various sub-sectors. Of the 10, five have 100 per cent of their assets located in China: CapitaLand China Trust (CLCT), Sasseur Reit, EC World Reit, BHG Retail Reit, and Dasin Retail Trust. The five have an average gearing ratio of 35 per cent, lower than the average of S-Reits (38 per cent); trade at a price-to-book ratio of 0.8 time; and have an average distribution yield of 5.6 per cent.

CLCT, the largest China-focused S-Reit, has expanded its investment mandate to include office and industrial assets including business parks, logistics facilities, data centres and integrated developments. With the recent acquisition of business parks and balance 49 per cent interest in Rock Square, CLCT's portfolio consists of 11 retail malls and five business park properties across 10 cities.

CLCT noted in its Q1 business updates that its retail portfolio has seen encouraging recovery in shopper traffic and tenant sales, with yoy increases at 52.1 per cent and 47.2 per cent, respectively. It has an above-market occupancy rate of 94.4 per cent. At its business parks, the percentage of workforce reporting to work returned to pre-Covid-19 levels by mid Q2 2020 and this segment achieved strong rental reversion. Most new tenants in CLCT's business parks portfolio are from high-growth sectors such as electronics (52 per cent of new tenants), information and communications (28 per cent) and e-commerce (17 per cent).

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Sasseur Reit, Asia's first outlet mall Reit, has four outlet malls located in Chongqing, Bishan, Hefei and Kunming. In FY2020, it recorded a one per cent increase in distributable income and maintained its distribution per unit despite having to close its outlets for 45 days last year. Sasseur Reit has a gearing ratio of 27.9 per cent, one of the lowest among S-Reits. Its sponsor has three new projects, bringing the number of pipeline projects to 12. There were three pipeline properties at its listing in 2018. Sasseur Reit will announce its Q1 numbers on May 12.

EC World Reit is the first specialised e-commerce, supply-chain management and logistics focused S-Reit. It has eight properties in the e-commerce clusters of Hangzhou and Wuhan. It recorded resilient 10.7 per cent and 11.8 per cent yoy increases in gross revenue and net property income, respectively, in FY2020, attributed to its Fuzhou E-Commerce acquisition in August 2019. The Reit has a gearing ratio of 38.1 per cent and a 99.3 per cent occupancy rate. EC World Reit will announce Q1 numbers on May 11. SGX RESEARCH

• For more research and information on Singapore's Reit sector, visit sgx.com/research-education/sectors for the monthly S-Reits & Property Trusts Chartbook.
• Source: SGX Research S-Reits & Property Trusts Chartbook.