- POSTED: 13 Dec 2013 00:02
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Investor sentiment regarding China-linked stocks is perking up on the Singapore Exchange.
SINGAPORE: Investor sentiment regarding China-linked stocks is perking up on the Singapore Exchange.
This came after China, the world’s second largest economy, released some favourable economic data recently which could boost the upside potential for these counters.
The latest data showed China's retail sales grew at a better-than-expected 13.7 per cent year-on-year in November, picking up from 13.3 per cent the month before.
Analysts say this will benefit consumer stocks like massage chair maker Osim which derives 55 per cent of its sales from North Asia, according to a recent DBS Vickers report.
However, some market experts say the stock, which has gained 27 per cent so far this year, may now be overvalued.
Luminance Capital CEO Roshan Padamadan said: "Consumer stocks, etc, they have a lot of future earnings already priced in, and this is assuming that they would grow further.
"At some point, the markets -- you can't keep growing at the same pace, your growth rates -- do come down. It's just mathematical. To grow at the same pace, you've got to be much better."
Meanwhile, investment bank Morgan Stanley, which tracks large cap stocks in Singapore, says concerns about China's economy dramatically slowing down have undervalued commodities stocks in the last four to five years.
“We are recommending global cyclicals, with the improvement in growth in the US, with probably some stability of growth in China. We expect the global growth to improve from 2.9 per cent to 3.4 per cent," said Morgan Stanley's ASEAN equity strategist Hozefa Topiwalla.
Still, not all Singapore-listed stocks with exposure to China have gained favour with investors.
For instance, the FTSE Real Estate Holding and Development Index, which tracks property stocks, is at its lowest point this year after having fallen 16 per cent this year to 700 points.
This is despite property developers like CapitaLand, City Developments and Keppel Land expanding in China after Singapore's property market started to peak a couple of years ago.
In recent years, low interest rates and high liquidity have inflated asset prices, particularly in Asia. This has led to China and Singapore implementing a slew of property cooling measures and loan curbs to try and slow property price growth.
Terence Wong, research head at DMG & Partners Research, said: “Because the market is forward-looking, it will probably come under pressure for the first half of the year.
"Probably when things become a lot more stable, that is when I think the property developers will start to outperform.”
For now, China's plan to urbanise has also made investors look at stocks like Midas -- on expectations of more high-speed bullet train contracts -- as well as toll-road operator China Merchant.
Experts also note that with China becoming more environmentally conscious, this could benefit companies involved in China's air and water treatment sector.