80% of CapitaLand China Trust debts are in SGD

Earlier, I noted that Chinese reits have debts in non-RMB (link). 

CapitaLand China Trust's borrowings are mostly in non-RMB too. In fact, 80% of its borrowings are in SGD. So when SGD is getting stronger while RMB is getting weaker, the leverage and the amount of interest payments rose. 

CapitaLand China Trustowns assets in China. Its gearing is 41.5%. 

Based on 2H 2023's DPU of 3 cents and share price of 0.695, CapitaLand China Trust dividend yield is around 8.6%. 

Will give CapitaLand China Trust a miss, as I don't like the currency mis-match in its debts. 

Why own S-Reits, why not own HK developers?

Singaporeans are familar with S-Reits, especially since S-Reits has been a good asset class to own in last decade till 2022.

However, in the current high interest rate environment, S-Reits share price have been falling recently. Similarly, HK developers share price also have been falling. 

Currently, some HK developers may be offerring higher yield with lower leverage, compared to S-Reits. 

Let's compare with same examples.

NikkoAM-StraitsTrading Asia ex Japan Reit ETF (CFA.SI)

Current share price: 0.745

Dividend Yield: 6.3%

HongKong Land (H78.SI)

Current share price: USD$2.90

Dividend: USD$0.22

Dividend Yield: 7.6%

Gearing ratio (from its FY2023 slides): 17%

Hang Lung Properties (101.HK)

Current share price: HKD$8.17

Dividend: HKD$0.78

Dividend Yield: 9.5%

Gearing ratio (from its FY2023 slides): 31.9%

Note: I have shares in Hongkong Land and Hang Lung Properties.

Both Hongkong Land and Hang Lung Properties are developing new malls/offices/hotels in China; they will be progressively completed between 2024 - 2030. So, their recurrent rental income could rise in coming years. 

Thus, compared to S-Reits, it could be more worthwhile to hold HK developers with higher yield and lower leverage. 

Not optimistic on S-Reits

I am not optimistic on S-Reits, as I think that US Fed rate may not decline by much this year. 'Higher (rates) for longer' lead to higher finance cost and hence lower DPU for S-Reits in general. 

Larry Summers (see link to video below) noted that Fed should not cut rates given current config of low unemployment, strong economic growth and the recent CPI data

https://www.youtube.com/watch?v=LXDNZuYUn-o

I had sold my stakes in United Hampshire Reit earlier in March 2024.

Currently, I only has stake in Cromwell, which is a European Reit. EU is more likely to cut their interest rate given its weak economic growth and lower inflation of 2.4% in March 2024.