Singapore firms capitalise on opportunity in China market
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China’s economic growth may have been at its weakest rate in a quarter of a century last year, but some Singaporean firms with operations there are finding pockets of opportunity as the world’s No 2 economy matures from one based on industry to one fuelled by consumption.
Among them, warehouse operator Global Logistic Properties (GLP) yesterday reported a 64 per cent rise in third-quarter net profit to US$184 million (S$257.4 million), helped by a strong performance from its China operations, while CapitaLand Retail China Trust (CRCT) — the first China shopping mall real estate investment trust in Singapore — said its distributable income for the quarter ended December rose 6.5 per cent to S$21.8 million, highlighting China’s growing urban population and rising retail sales.
Singapore-headquartered GLP, which operates warehouses in China, Japan, Brazil and the United States, said its China earnings were up 50 per cent on higher asset values, growth in rent, new leases and renewed lease contracts.
Analysts expect the company to continue to benefit from demand for logistics facilities due to booming e-commerce, as well as the Chinese government’s attempts to guide its economy to a more sustainable path led by domestic consumption.
“Within China, the domestic economy is being stoked by increasing urbanisation. There are geographies within the country that are growing well above the national average, particularly in Tier 2 and Tier 3 cities,” said Barclays senior regional economist Leong Wai Ho. “Logistics is one area of growth there. Logistics hubs have moved westwards. There’s been continuous investment in the sector itself,” he added.
“The stock market issue, the currency issue in China, is a bit divorced actually from economic issues,”
China’s growth has been steadily falling for the past half-decade as Beijing attempts to wean the economy away from exports and infrastructure investment and towards domestic consumption and services. The economy grew 6.9 per cent last year, its slowest expansion in 25 years.
Chinese equities are slumping, too — the Shanghai Composite Index is down about 21.5 per cent this year. The yuan has weakened steadily since Beijing devalued the currency in August.
The country on Wednesday announced an economic growth target of 6.5 per cent to 7 per cent this year.
But the Chinese stock-market swings and capital outflows do not reflect trends in the economy, which is still expanding well amid efforts to rebalance growth, according to the head of the European Bank for Reconstruction and Development (EBRD).
“The stock market issue, the currency issue in China, is a bit divorced actually from economic issues,” the EBRD’s president, Suma Chakrabarti, told Bloomberg in an interview on Monday. While the advance in China’s gross domestic product has slowed, 6.5 per cent “growth in the world’s second-biggest economy is pretty good actually for the rest of us”.
Questions & Answers
Q.Which Singaporean companies are capitalising on opportunities in the Chinese market?
Which Singaporean companies are capitalising on opportunities in the Chinese market?
Warehouse operator Global Logistic Properties (GLP) and CapitaLand Retail China Trust (CRCT) are finding success. GLP reported a 64 per cent rise in net profit, while CRCT's distributable income for the quarter ended December increased by 6.5 per cent.
Q.What factors are contributing to Global Logistic Properties' strong performance in China?
What factors are contributing to Global Logistic Properties' strong performance in China?
GLP's China earnings rose 50 per cent due to higher asset values, growth in rent, new leases, and renewed lease contracts. Analysts also expect continued demand for logistics facilities from e-commerce and government guidance towards domestic consumption.
Q.How is China's economy changing, and what impact is this having?
How is China's economy changing, and what impact is this having?
China is shifting from an industry-based economy to one fuelled by consumption and services. This rebalancing has led to slower GDP growth nationally, but also creates opportunities, particularly in logistics and urbanisation in Tier 2 and Tier 3 cities.
Q.Do recent stock market issues and currency weakening accurately reflect China's economic trends?
Do recent stock market issues and currency weakening accurately reflect China's economic trends?
According to the head of the EBRD, the stock market issues and currency weakening are somewhat disconnected from the broader economic trends. He states that a 6.5 per cent growth rate for the world's second-largest economy is still positive.
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