The Chinese yuan slumped to an 11-year low on Monday, 26 September to around 7.1425 to the US dollar. This was touted to be China’s retaliation to the US imposing more tariffs on Chinese products.
Because of that, the Chinese yuan has also weakened considerably against the Singapore dollar over the last year. As of the time of writing, one Singapore dollar can be exchanged for 5.16 Chinese yuan, as compared to 4.98 just a year ago. The sudden devaluation of the Chinese currency will definitely have a knock-on effect on numerous Singapore-listed China companies that report their earnings and pay dividends in Singapore dollars.
With that said, here are some companies that will be negatively affected by China’s currency devaluation.
There are a number of REITs in Singapore that have primarily properties located in China. Not only do these REITs collect rent in RMB, but they also have properties that are valued in RMB. As such, these REITs could see both a negative impact on book value per share and distribution per share.
CapitaLand Retail China Trust (SGX: AU8U), Sasseur Real Estate Investment Trust (SGX: CRPU), BHG Retail Trust (SGX: BMGU) and Dasin Retail Trust (SGX: CEDU) own retail properties in China. EC World Real Estate Investment Trust (SGX: BWCU), which owns specialised logistics and e-commerce logistics properties in China, will also likely see a negative impact from the decline in the Chinese Yuan.
Besides REITs, property developers that own land banks and have registered sales in China will see a negative currency impact.
Hongkong Land Holdings Limited (SGX: H78) has a property development portfolio in China that spans 20 projects across seven cities. As a whole, China accounts for 55% of its entire developmental property portfolio there. With Hongkong Land reporting in US dollars, the weaker Chinese yuan will be a drag on earnings on these projects.
CapitaLand Limited (SGX: C31) has over 3,000 units ready to be released in the latter half of 2019. The property giant also sold RMB18.3 billion worth of properties, with 50% of value expected to be recognised later this year. These sales will be recognised at a lower Singapore-dollar amount when converted at current exchange rates.
Keppel Corporation Limited (SGX: BN4) has around 20,668 residential units yet to be sold in China. Yanlord Land Group Limited (SGX: Z25), a real estate developer that focuses on developing high-end properties in China, will most likely also be negatively impacted.
Besides property companies, there are numerous other companies that have operations in China.
Companies such as Yanzijiang Shipbuilding Holdings Ltd (SGX: BS6) and Hutchison Port Holdings Trust (SGX: NS8U) that have operations in China will likely also see headwinds from the currency devaluation.
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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 Jeremy Chia owns shares in Sasseur Real Estate Investment Trust, EC World Real Estate Investment Trust, and Keppel Corporation Limited. The Motley Fool Singapore has a recommendation on Capitaland Retail China Trust, Hongkong Land Holdings Limited, CapitaLand Limited.