CapitaLand, Singapore’s largest real estate developer announced a divestment plan to sell its share of interest in a group of companies that hold 20 retail malls mainly in China’s tier 2 to tier 3 cities for an agreed value of S$1.71 billion.

This deal is expected to generate net proceeds of about S$660 million and a net gain of about S$75 million.

The divestment malls comprises 4% of CapitaLand’s total malls and 7% of its China mall’s property value, therefore the impact to its operational income is limited. CapitaLand’s CEO explained that the group is ‘seizing a window of opportunity offers by transformative changes to China’s retail industry to reconstitute its mall portfolio… and continue to invest in dominant assets in core Chinese city clusters’.

CapitaLand’s share price was little changed at market open, as investors are digesting the news and assess the pros and cons of this major deal.

Crude oil price stayed at elevated levels as last night’s US DoE commercial crude oil report showed some 7.41 million barrels drop in stockpile over the last week. This smashed market consensus of 5.43 million drop and marked an eight-consecutive week’s slump in inventory as demands are picking up.

US manufacturing PMI registered 59.7 in December, suggesting the rate of expansion is accelerating and US manufacturing sector is riding strong upward momentum. Last night’s European PMI reading also beat consensus from the upside. A string of evidence suggest that global factory boom is slowly draining up commodities surplus, sending oil and metal prices to nearly three-year high.  

Singapore’s Straits Times Index soared 36.8 points or 1.06% yesterday, marking three-consecutive day’s rally in the start of 2018. The SGX turnover registered S$2.0 billion on Tuesday, nearly doubled its average daily turnover over the past month. The best performing sector is banks, with DBS, UOB and OCBC gained 2.4%, 1.9% and 0.45% respectively. Despite a 20% gain in 2017, Singapore’s blue chips are still among the cheapest in Asia when it comes to valuation. The Straits Times Index is trading at around 11 x trailing Price-to-Earnings, comparing to 14 x Hang Seng and 17 x Shanghai Composite.

​CapitaLand chart

Market calendar – Crude Oil Stocks (net change)

 

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