The sweeping global tariffs blocked by US Court of International Trade may take some stress out of China market.

The fund will contribute 20 billion yuan to CLI&rsquo s funds under management when fully deployed

[SINGAPORE] CapitaLand Investment : 9CI +0.4% (CLI) on Wednesday (May 21) announced the launch of its first onshore master fund in China, the CLI RMB Master Fund, with a total equity commitment of five billion yuan (S$921 million).

 

The company has also secured a domestic insurance company to take up a majority stake in the master fund, which is expected to contribute 20 billion yuan to CLI&rsquo s funds under management (FUM) when fully deployed.

 

The CLI RMB Master Fund will commit equity to a series of sub-funds for multi-asset class investments to enable the global real asset manager to scale through domestic capital partnerships, it said.

 

The sub-funds will invest in &ldquo high-quality, income-producing assets with long-term growth potential&rdquo , such as business parks, retail, rental housing and serviced residences across Tier 1 and top Tier 2 cities. They may also invest in special opportunities in sectors such as data centres, logistics parks and offices, the real asset manager added.

 

Kara Wang, chief investment officer of CLI China, said: &ldquo The master fund&rsquo s strategy of investing in asset classes such as business parks, retail, rental housing and serviced residences aligns closely with China&rsquo s national priorities, supporting its transition into a consumption and innovation-driven economy.&rdquo

 

In line with its asset-light strategy to grow its FUM, the global real asset manager has also secured a major domestic insurance company to take on a majority stake in the fund.

 

Puah Tze Shyang, chief executive officer of CLI China, said: &ldquo This allows us to tap into a rising trend of insurance companies increasing their capital allocation to real estate in China.

 

&ldquo With a major domestic insurance company as a co-investor in the master fund, we are well-placed to attract other insurance firms to invest in the sub-funds and rapidly expand our domestic investor base.&rdquo

 

With the new fund, CLI has successfully raised 54 billion yuan across seven renminbi funds since 2021.

 

The launch of the master fund follows CLI&rsquo s application to list its first real estate investment trust (Reit) in China, CapitaLand Commercial C-Reit (CLCR), announced in April.

 

CLCR&rsquo s initial portfolio comprises two major malls, the CapitaMall SKY+ in Guangzhou and CapitaMall Yuhuating in Changsha, with a combined value of around 2.8 billion yuan.

This comes as stable and supportive government policies post-election could create room for fiscal policy support in the event of an economic downturn, an RHB analyst adds

 

[SINGAPORE] RHB analysts maintained their &ldquo overweight&rdquo call on Singapore-listed real estate investment trusts (S-Reits) amid &ldquo softer interest cost pressures&rdquo &ndash particularly for Singapore-centric Reits. 

 

This comes as most S-Reits under RHB&rsquo s coverage report lower overall interest costs, as &ldquo sharp falls&rdquo in domestic rates have benefited interest costs, said RHB analyst Vijay Natarajan in a Tuesday (May 20) research note. 

 

He added: &ldquo The fall in benchmark rates has also resulted in lower yields for alternative options (ie Treasury bills and Singapore savings bonds) and rising yield spreads for S-Reits &ndash potentially creating room for fund inflows to the sector if the tariff overhang is removed.&rdquo

 

&ldquo With benign sector valuations, we still see medium-term risk-rewards in favour of S-Reits,&rdquo he noted.  

 

Top picks include CapitaLand Integrated Commercial Trust (CICT) : C38U 0%, CapitaLand Ascendas Reit (Clar) : A17U 0%, Frasers Centrepoint Trust (FCT) : J69U -0.9%, Keppel Reit : K71U +0.59%, and Aims Apac Reit : O5RU +0.79% &ndash all of which were assigned a &ldquo buy&rdquo call. 

 

Cautiously positive guidance, strong operating numbers

The majority of S-Reits under RHB&rsquo s coverage reported in-line results with operational numbers remaining &ldquo strong&rdquo , Natarajan said. 

 

&ldquo More than half of the S-Reits that reported financials... saw positive quarter-on-quarter and year-on-year net property income growth, supported by stable occupancy and positive rent reversions,&rdquo he said. 

 

A key positive was &ldquo softer interest cost pressures&rdquo , particularly for S-Reits focused on Singapore. 

 

There were no major changes to operational performance guidance, which is &ldquo cautiously positive&rdquo , as the direct impact of US tariff policies has been &ldquo minimal&rdquo so far, while risks of uncertainties stemming from them remain clouded. 

 

Healthcare S-Reits outperforming broader S-Reit market and sub-segments so far this year

Hence, a majority of the S-Reits under coverage foresee stable occupancy rates and positive rent reversions, barring certain overseas markets and segments. 

 

Singapore-centric Reits favoured to &ldquo outperform&rdquo  

Among S-Reits, Natarajan thinks large-cap, high-quality Singapore-centric Reits could do well. 

 

In particular, he favours industrial, office, healthcare and suburban retail sub-sectors, while that of hospitality is the least preferred. 

 

&ldquo Amidst a currently volatile macroeconomic backdrop, we expect Singapore-centric Reits to continue to relatively outperform and see larger fund inflows.&rdquo  

 

This comes as stable and supportive government policies post-election could create room for fiscal policy support in the event of an economic downturn, which is a positive for the real estate sector, Natarajan said. 

 

Noting that the three-month key benchmark Singapore overnight rate average has declined 70 basis points year to date, he adds that falling domestic interest rates are lowering Singapore-dollar denominated borrowing costs. 

 

&ldquo Nearly three quarters of S-Reits saw flat to moderate interest cost declines quarter on quarter, with the largest declines seen among Singapore-centric S-Reits,&rdquo he said. 

 

&ldquo In addition, most of the S-Reits also noted slight reductions in bank loan margins amid a flush of liquidity in the banking system.&rdquo

 

Reits that logged the highest quarter-on-quarter interest cost declines include Far East Hospitality Trust (60 basis points), OUE Reit (50 basis points), Sasseur Reit (30 basis points), First Reit (30 basis points) and Acrophyte Hospitality Trust (30 basis points).

 

Moreover, the stability of the Singapore dollar &ndash benefiting from &ldquo capital flight-to-safety&rdquo &ndash and the Republic&rsquo s growing financial hub status, could further benefit Singapore-centric Reits, he said.