SGX Market Updates

FTSE ST China Index's 3 Industrials Stocks


PUBLISHED ON |

21 October 2020

  • Of the 10 largest constituents of the FTSE ST China Index, 3 are Industrials stocks – Yangzijiang Shipbuilding, Hutchison Port Holdings Trust and Sunpower Group.

  • These 3 Industrial stocks averaged total returns of 33% in 3Q2020 with Hutchison Port Holdings Trust as the top performer, generating 76% total returns. In the first 14 trading days of 4Q2020, Sunpower Group added to its third quarters gains with 10% total returns.

  • Despite challenging business conditions, Yangzijiang Shipbuilding and Sunpower Group’s performances have remained resilient, due to strong balance sheets, healthy order books, and China's gradual economic rebound. Hutchison Port Holdings Trust, which is focusing on operational efficiency and cost management, expects COVID-19's negative impact to be reduced gradually as China's manufacturing activity resumes.




The FTSE ST Index Series includes two China themed indices – the FTSE ST China Index and the FTSE ST China Top Index.

The FTSE ST China Index is based on the underlying constituents of the FTSE ST All-Share Index, which have the majority of their sales revenue derived from or operating assets located in Mainland China. The FTSE ST China Top Index is a subset of the FTSE ST China Index, and aims to capture the performance of the 20 largest companies, with Chinese exposure, on the SGX Mainboard by full market capitalisation.

Companies eligible for inclusion in the FTSE ST China Index and/or the FTSE ST China Top Index must feature in the FTSE ST All-Share Index, and at each review derive at least 50% of their sales revenue from Mainland China, or have at least 50% of their operating assets located in Mainland China.

Of the 10 largest constituents of the FTSE ST China Index, 3 are Industrials stocks – Yangzijiang Shipbuilding, Hutchison Port Holdings Trust and Sunpower Group.


Stock SGX
Code
Mkt Cap
S$M
P/B 3Q2020
Total Returns
%
Sector
Wilmar International F34 27,541 1.2 8.5 Consumer Staples
Yangzijiang Shipbuilding BS6 3,814 0.6 6.5 Industrials
Tianjin Zhongxin Pharmaceutical T14 2,179 0.8 -9.0 Health Care
Yanlord Land Group Z25 2,144 0.4 1.9 Real Estate
Hutchison Port Holdings Trust NS8U 1,619 0.4 76.3 Industrials
CapitaLand Retail China Trust AU8U 1,577 0.8 -9.6 Real Estate
Sasseur REIT CRPU 939 0.9 6.1 Real Estate
China Aviation Oil G92 839 0.8 -7.0 Energy
Sunpower Group 5GD 474 1.2 17.1 Industrials
SIIC Environment Holdings BHK 466 0.3 -6.0 Utilities

Source: Bloomberg, SGX Stock Screener, FTSE Russell.
Top 10 constituents based on FTSE ST China Index factsheet as of 30 Sep 2020.
Data based on Bloomberg and SGX Stock Screener as of 20 Oct 2020.



Extracts from Yangzijiang Shipbuilding (SGX:BS6)’s recent announcements

  • Order book remains healthy, and strong balance sheet to ride through the industry downturn. Although the challenges in the shipbuilding market are severe and complicated, Yangzijiang Shipbuilding believes that it will not alter the long-term balance in demand and supply.
  • Global trade and the economy will recover, and at the same time, the industry will evolve with significant structural changes in favour of clean-energy vessels, with energy efficiency and emission at the centre of vessel design and production.
  • Its established operational system, strong design capabilities and the partnership at YAMIC positions it in the long-term evolution of the shipbuilding industry.
  • COVID-19 has weighed on the price of new vessels and charter rates, and dampened shipowner sentiment and the outlook for the shipbuilding industry. The pandemic provides an opportunity for the industry to improve by developing and introducing more energy-efficient and environmental-friendly vessels – YZJ remains committed to the long-term strategy of growing the capability in building these vessels for sustainable growth.
  • In 2020 YTD, the Group has secured new orders for 23 vessels worth approximately US$700 million (not considering the value of the option orders).
  • According to Sea Intelligence, container freight volumes are forecast to decrease by only 0.1% in 3Q 2020, due to consumption patterns shifting from services to physical goods, savings from travel providing financial means for more consumer products, and the need to furnish home offices.
  • Sea Intelligence has reversed its earlier bearish forecast, forecasting global container liners could see a total profit of US$10.7-US$15.4 billion for 2020, compared to US$5.9 billion for 2019, following a rationalisation in shipping capacity which has supported charter rates.


Extracts from Hutchison Port Holdings Trust (SGX:NS8U)’s recent announcements

  • With manufacturing activity in China mostly resuming and many overseas countries loosening lockdown and border controls, it expects the negative impact of COVID-19 on Hutchison Port Holdings Trust (HPHT)’s volumes will gradually be reduced.
  • Faced with extremely challenging global and macroeconomic events, the Trustee-Manager has taken a more prudent approach, and as of 7 June 2020 announcement it repaid HK$250 million of HPHT’s existing debt, which has resulted in a decrease in its distributions per unit (DPUs).
  • HPHT will continue to focus on operational efficiency and cost management to increase the competitiveness of its ports and generate value for its unitholders.
  • One of its key initiatives was formation of the Hong Kong Seaport Alliance (HKSPA) with, among others, Modern Terminals Ltd, a key terminal operator in Hong Kong.
  • The Trustee-Manager believes that the HKSPA will enable better utilisation of the existing capacity of HPHT’s berths by increasing flexibility in overall berth and yard planning, which will improve the service standard for customers, thereby increasing overall competitiveness of the berths.
  • To mitigate the sharp downturn in demand caused by COVID-19, coordination among alliance members to optimise fleet and capacity continues.
  • Against this backdrop, HPH Trust will continue to build on its strengths and is committed to serving its customers, supporting and complementing this industry shift through its mega-vessel handling capabilities and continuous process improvements.


Extracts from Sunpower Group (SGX:5GD)’s recent announcements

  • Sunpower believes that it has turned around from the temporary headwinds of COVID-19 and is fulfilling the growth potential of its business, with China being the first major economy in the world to recover from COVID-19 due to successful virus containment measures and supportive economic policies.

    • Oxford Economics has forecast China’s GDP to grow 2.5% in 2020, while Caixin Research Institute forecasts 2.6%- 3.0% growth
  • The Group plans to continue to execute its strategy in, namely by:
    • Solidifying its market position as an environmentally clean centralised provider of industrial steam, electricity and heating through continuous ramp-up of existing projects, as well as investments and acquisitions of new projects.
    • Riding on opportunities arising from structurally driven environmental protection and national development trends, such as the closure of small dirty boilers, relocation of factories into industrial parks and development of biomass heating.
    • Building on the stability of the M&S business, supported by advanced proprietary technologies, extensive expertise in energy-saving, energy-efficient environmental protection products and solutions.
  • Barring unforeseen circumstances, the Group expects the business trends below to benefit its 2020 performance:
    • Additional drivers including full-year contributions from newly acquired GI plants, and anticipated additional contributions from Shantou Phase 1 and Xintai Zhengda’s new plant.
    • Continued ramp-up of existing GI plants, driven by:
      • Continuous connection of new customers following mandatory closures of small dirty boilers and/or mandatory relocation into industrial parks.
      • Organic growth of customers and industrial parks served by the Group’s GI plants.
      • Potential earnings-accretive M&A of brownfield GI plants.
    • Resilient and solid M&S business with proven track record:
      • Order book sustained at a high of RMB2.8 billion as at July 2020.
      • Diversified base of high-end customers across the globe with ~70% repeat customers.
      • Cutting-edge proprietary technologies and strong commercialisation capabilities.
      • Ability to acquire quality orders, benefiting from its industry leadership, extensive experience and seasoned management team.






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