SINGAPORE (June 20): OCBC has reiterated its “Hold” call on CapitaLand Retail China Trust (CRCT), with a target price of $1.43 on the back of a weak retail market and an impending influx of office supply within Beijing.

CRCT’s Beijing exposure comprises five out of 10 malls in its portfolio, with the remaining five located respectively in Shanghai, Wuhan, Zhengzhou, Hohhot, and Wuhu.

Retail sales in Beijing saw a 6.8% decline relative to growth in the same period last year despite registering a slight 1.0% increase y-o-y to RMB161.7 million ($33.1 million) in the first two months of 2016.

Mall occupancy rates also decreased 0.3% to 94.5%. This was in line with a report by CRCT that indicated that tenants’ sales had clocked a mild growth of 1.0% y-o-y, shopper traffic had fallen 1.4% y-o-y, while overall portfolio committed occupancy fell 0.5% q-o-q to 94.6%.

Compounding the report is the expectation of an influx of supply in the Beijing market for the remainder of 2016, with eight more mid- to high-end shopping malls scheduled to be launched. This will represent a 5.6% increase in retail GFA, or about 590,000 sqm.

Moreover, the research house expects the general retail market to be weak within Beijing and have pared down assumptions for rental reversions and occupancy. The report also notes that a continued drag on CRCT’s rental reversions for FY16 is within its expectations.

As at 2.35pm, units of CRCT are up 0.68% at $1.49.