• In the 2Q21 to date, the FTSE ST China Index has consolidated on its 1Q21 gains, with a 1% decline, bringing the 2021 YTD total return to 15%. The trio of Hong Leong Asia, Sunpower and Yangzijiang have led the Index in the 2Q21 to date, averaging 23% gains, while seeing significant growth in trading turnover in the 2021 YTD.
   
• More recently, the past two weeks have seen the Consumer-orientated stocks of the Index outpace, with Tianjin Zhongxin Pharmaceutical, and trio of REITS – EC World REIT, Sasseur REIT and CapitaLand China Trust. This brings the average 2Q21 to date total return of the trio of REITs to 7%. The trio of REITs also average a 6.5% yield. 
   
• The China Bonds ETF issued by CSOP Asset Management has seen the most inflows of all ETFs listed on SGX so far in both the 2021 YTD and 2Q21 to date and now maintains an AUM of S$1.9 billion. The ETF has gained 4% so far in the 2021 YTD and goes ex-dividend with a 15 US cent per unit distribution on Wednesday 16 June.

Hong Leong Asia, Sunpower and Yangzijiang Shipbuilding Chalk Up Significant Growth in Trading Turnover

The FTSE ST China Index made a comparatively strong start to the year, generating a 14.7% gain in the 2021 year to 11 June, following a 7.4% total return in 2020.  The Index is composed of 15 stocks of the FTSE ST All-Share Index that report more than 50% of their revenues or assets to China (click here for more). As illustrated in the chart below, the Index has outpaced both the parent FTSE ST All-Share Index, in addition to a number of relevant regional and China Indices. 

Over the past five years, the FTSE ST China Index and Hang Seng China Enterprises Index generated similar total returns of 51.5% and 45.6% respectively. Since the end of March, the FTSE ST China Index has mostly consolidated on its 15.9% 1Q21 gains, generating a 1.1% decline in total return, bringing the 2021 year to 11 June total return to 14.7%.

The Industrial trio of Hong Leong Asia, Sunpower and Yangzijiang Shipbuilding continued to maintain significant growth in investor activity, in addition to leading the Index in the 2Q21 to 11 June, averaging 23% gains.

• The average daily turnover of Hong Leong Asia, the industrial arm of the Hong Leong Group has grown fivefold in the 2021 year to date from the full 2020 year. This has placed the stock among the top 100 stocks by turnover, up from top 200 stocks by turnover in 2020.  After ending last year at 76.5 cents per share, the share price of Hong Leong Asia has rallied to S$1.00 as of 11 June. Hong Leong Asia’s subsidiary China Yuchai International has a controlling interest in its principal operating subsidiary Guangxi Yuchai Machinery Company, which is one of the largest engine manufacturers for commercial vehicles in China. Through R&D, the China Yuchai arm has the ability to produce engines compliant with China National VI and Tier-4 emission standards. In March, China Yuchai’s President was anticipating greater buying activity in National VI (a) compliant diesel engines, prior to its full implementation on 1 July, and hence skewed demand in the first half of 2021. Hong Leong Asia noted in a recent AGM question that the China National VI standard is equivalent to the Euro VI standard, reiterating China Yuchai’s new engine products meet this new industry emission standard. Hong Leong Asia added that China Yuchai is also developing alternative new energy solutions in new generation hybrid power and working closely with its customers to create innovative and sustainable urban solutions for the future that are in the early stage of development and will take time to develop their full potential.
   
• The average daily turnover of Sunpower, an environmental protection specialist, has also grown fivefold in the 2021 year to date from the full 2020 year. This has placed the stock among the top 60 stocks by turnover, up from top 120 stocks by turnover in 2020. On 27 May, Sunpower announced it had completed the construction of the steam distribution pipeline that connects Changrun Project to Sanli’s facilities and commenced the steam supply to Sanli ahead of schedule due to its strong execution and project management capability. Sunpower is strategically expanding into anti-pollution investment projects (“Green Investments”) which generate intrinsic value in the form of long-term, recurring and high-quality cash flows.  For its 1QFY21 (ended 31 Mar) Sunpower reported that group revenue rose 31.2% YoY to RMB 882.8 million and group PATMI improved 17.0% YoY to RMB 59.7 million with underlying operating cash inflow improved significantly to RMB223.6 million.
   
• The average daily turnover of Yangzijiang Shipbuilding, also an STI component, has also grown 80% in the 2021 year to date, from the full 2020 year. This has placed the stock as the sixth most traded stock by turnover after ranking as the thirteenth most traded stock in 2020. In the 2021 year to date, the Group has secured new orders for 75 vessels (incl. 51 containerships) with a total contract value of US$4.0 billion (containerships making up US$3.4 billion), its largest order wins since 2008. Earlier this month, BIMCO highlighted containership contracting had seen a record-breaking start to the year, with 2.2m TEU (twenty-foot equivalent unit) being ordered. This is more than 12 times higher than the 184,254 TEU ordered in the first five months of 2020 and more than 60% higher than the previous record dating back to the start of 2005.

The performances, combined net institutional and net proprietary flows of the 15 stocks of the FTSE ST China Index are tabled below. The combined market capitalisation of the 15 stocks is S$55 billion.

 Source: SGX, Refinitiv, Bloomberg (Data as of 11 June 2021)

 

The table above is sorted by June month to date performances. For month to date, Consumer-orientated stocks led the Index, with Tianjin Zhongxin Pharmaceutical, and a trio of REITS – EC World REIT, Sasseur REIT and CapitaLand China Trust. This brings the average 2Q21 to date total return of the trio of REITs to 7.1%, and 2021 average year to date return to 11%. The trio of REITs also average a 6.5% yield, with Sasseur REIT maintaining a 7.6% yield, EC World REIT maintaining a 7.2% and CapitaLand China Trust maintaining a 4.7% yield as of the end of May.

Sasseur REIT and EC World REIT have also been among Singapore’s 10 best performing REITs in the 2021 year to date. CapitaLand China Trust has expanded its investment mandate to an AUM mix of 85% retail to 15% business park with a long term goal of achieving a 40% integrated development, 30% retail and 30% new economy assets.

The ICBC CSOP FTSE CHNA GOV BD ETF goes ex-dividend with a 15 US cent per unit dividend on Wednesday 16 June.

The China Bonds ETF issued by CSOP Asset Management has seen the most inflows of all ETFs listed on SGX so far in both the 2021 year to date and 2Q21 to date, with the ETF now maintaining an AUM of S$1.9 billion. Total inflows to the ETF in the 2021 year to date are US$253 million (S$336 million). The ETF has gained 4.1% so far in the 2021 year to date and pays dividends on a semi-annual basis.

The ETF’s September 2020 IPO price was USS$10.00 and the units are now priced at US$10.79. The yield spread of China 10 year Bonds to US 10 year Bonds has widened from 152 bps at the end of 1Q21 to 170 bps at present, with the Issuer attributing the premium as a key driver of the foreign fund inflows into the onshore bond market over the recent 12 months.

The total value of trade between China and its partners in Developing Asia has soared by close to 50% from US$434 billion in 2015 to US$640 billion in 2020. Over these years, the US$200 billion growth in China’s trade to Developing Asia, more than offset the US$50 billion decline in trade to the United States. This has structurally poised Developing Asia as a larger of the two trading partners and the value of trade between China and its ASEAN partners from 2015 to 2020 has also grown.

Over the recent years, regional supply chains have been subjected to substantial restructuring. This has been influenced by the rise of the Asian consumer, and developments driving trade growth such as technology, communication and e-commerce. The IMF estimates that two-thirds of the world’s industrial robots are used in Asia, and the share of retail sales taking place online is 1.5 times larger in Asia than in Western Europe or the United States. Hence automation and e-commerce are both playing a key role to facilitate the channeling of China’s high household savings to consumption-driven growth. A more consumer-driven region would expect to see significant augmentation of service-orientated industries in Asia, with new GDP growth less led by the exports of goods to the West. Three key mega-sectors that are typically associated with domestic demand, partly due to onshore regulations and ultimate consumer focus, include finance-related services, business-related services and information and communication services. Innovation has also played a key role in China’s growth, with its yearly patent publications growing six-fold between 2010 and 2019, from 8,000 to 51,000. According to WIPO, this also saw China account for more Patent Cooperation Treaty (“PCT”) publications in 2019 than Japan at 50,000.

China’s National Bureau of Statistics will release May Retail Sales and Industrial Production reports on Wednesday, with the YoY momentum seen in April expected to continue based on consensus forecasts.