Here’s 1 Singapore-Listed REIT That’s Exposed To China’s Rising Trend Of Consumerism

China is currently transiting from an export and investment-based economy into one that is powered by consumer spending. While there are worries about the size of China’s debt, Chinese consumers remain upbeat about their future prospects.

In a March 2016 article, consulting firm McKinsey showed the results of a recent poll it conducted with Chinese consumers: 55% of respondents were confident about their future income growth over the next five years.

In Singapore’s stock market, there are many companies and trusts that are exposed to Chinese consumer spending. One such stock is CapitaLand Retail China Trust (SGX: AU8U), a real estate investment trust that owns mainly retail malls in China.

The REIT currently has 10 malls in its portfolio that are located in cities such as Beijing, Shanghai, and Zhengzhou. Here are three things worth noting about the REIT’s business fundamentals: .

1. High occupancy rate, positive rental reversion, and diversified tenant profile

As of the first-quarter of 2016, the REIT’s malls still have a “high” occupancy rate of 94.6%, though that’s a decline from the 95.1% seen in the first-quarter of 2015. Meanwhile, CapitaLand Retail China Trust had managed to achieve positive rental reversion of 7.3% for its portfolio during the same quarter.

The REIT’s tenant profile can be considered to be diversified given that its tenants can be grouped into 14 different retail segments. The three largest retail segments are Fashion & Accessories, Food & Beverages, and Department Stores. They account for, respectively, 25%, 23%, and 16% of CapitaLand Retail China Trust’s rental income in the month of March 2016.

2. Some protection from e-Commerce threat

While China’s consumer economy might be growing, bricks-and-mortar retailers in the country have to also contend with the threat of e-Commerce. For retail malls, one way to protect themselves from the onslaught of online shopping is to have a thriving food & beverage scene – after all, those who would like to have a meal outside from home can’t do it over the internet.

In the case of CapitaLand Retail China Trust, I’ve already mentioned that 23% of its rent come from tenants in the Food & Beverages retail segment.

3. A gearing that is far lower than regulatory limits

CapitaLand Retail China Trust ended the first-quarter of 2016 with a gearing ratio of 28.7%. That’s low, considering that Singapore-listed REITs are subject to a regulatory gearing limit of 45%. The REIT also has an interest cover ratio of 6.4 and 74.1% of its borrowings are on fixed rates.

The latter means that the bulk of the REIT’s borrowings are insulated from any negative changes that could happen to the interest rate environment.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Ong Kai Kiat does not own shares in any companies mentioned.