Top 4 high dividend ETFs to watch in Hong Kong
The ETF market in Hong Kong is sophisticated and diversified, offering investment choices across multiple currencies, markets and asset classes. Since the first ETF was listed in Hong Kong in 1999, the market has grown to become one of the most diversified markets in Asia.
However, investors in Hong Kong are increasingly interested in high dividend ETFs, especially in the current market environment, where high dividend products have become an ideal choice for those seeking stable cash flows. High-dividend ETFs not only help investors diversify their risks, but also avoid the impact of passive income due to a single company's change in dividend payout policy. There are a variety of high dividend ETFs available in the Hong Kong market that offer investors good income potential.
This article will look at the top 4 high dividend ETFs to watch in Hong Kong, and explore the background of high dividend ETFs in Hong Kong.
History of high dividend ETFs in Hong Kong
The surge in high dividend and high-yield ETFs in Hong Kong is the result of a combination of factors, including policy support, the demand for catch-up growth, and changes in the interest rate environment, all contributing to the robust performance of high-dividend assets. This sector is expected to have significant potential moving forward.
1. Policy support
Policy support has had a positive impact on high dividend ETFs. The People's Bank of China (PBOC) has decided to set up the 'Swap Facility for Securities, Funds and Insurance Companies', a policy tool that supports eligible financial institutions to swap treasury bonds, central bank bills and other liquid assets with bonds, equity ETFs, CSI 300 constituent stocks and other assets as collateral. This measure enhances the intrinsic stability of the capital market and improves financial institutions' access to capital and ability to increase their stock holdings, which in turn may have a positive impact on high-dividend ETFs.
2. Catch-up demand
Catch-up market demand for high-dividend assets is gradually building up. During market cycles, high dividend assets may lag behind other sectors, but as the rest of the market rises sharply, funds begin to shift to undervalued high dividend assets, creating catch-up demand, which may push up the prices of related stocks and ETFs.
3. Declining interest rates and long-term fund support
The downward trend in interest rates and the support of long-term capital add to the appeal of high-dividend ETFs. The current market environment is characterised by a clear downward trend in interest rates, coupled with the gradual entry of long-term funds, which has further boosted investor interest in high dividend-paying assets. In particular, some leading dividend-paying stocks are yielding more than 5 per cent, making them more attractive to long-term investors in a low interest rate environment.
In the area of market analysis, the securities institution points out that the relative scarcity of assets is driving absolute return funds to increase their investment allocation to high dividend paying assets. As both short-term and long-term interest rates are on a downward trend, absolute return funds, represented by insurance asset managers, are expected to continue to increase their investments in undervalued high dividend paying sectors.
The trend reflects the market's quest for a stable source of income, especially against the backdrop of increased global economic uncertainty. In addition, trading congestion in high dividend-paying assets has not yet peaked, which means that there is still room for valuation repair in these assets, providing potential value-added opportunities for investors.
Top 4 high dividend ETFs in Hong Kong
There have also been ETFs tracking high dividends in the Hong Kong market. Here are the top four high dividend ETFs to watch out for:
1. Bosera Soes High Div Yield Index ETF
Bosera Soes High Div Yield Index ETF (Code: 03437) is the first central enterprise-themed investment product in the Hong Kong market, managed by Bosera Fund Management Co., Ltd., and officially listed on the Hong Kong Stock Exchange on July 10, 2024.
As of December 29, 2023, the average dividend yield of the top ten constituent stocks of the CSI National New Hong Kong Stock Connect Central Enterprise Dividend Index in the past year was as high as about 7.86%, showing the significant advantage of the central enterprise sector in dividend returns. On the first day of listing, the ETF's transaction volume exceeded 2.1 million yuan, showing high market attention and liquidity.
2. Ping An of China CSI HK Dividend ETF
Ping An of China CSI Hong Kong Dividend ETF (Code: 03070) focuses on tracking the performance of the CSI HK Dividend Index by investing in high-dividend yielding stocks in the Hong Kong market, providing investors with an investment vehicle to pursue a steady stream of cash flow returns. The investment objective of the ETF is to closely track the performance of the CSI HK Dividend Index and provide investors with a stable source of dividend income by investing in high dividend yielding stocks.
As of 14 October 2024, the closing price of Ping An of China CSI Hong Kong Dividend ETF was HK$32.56, up 2.005% on the day, with a turnover of HK$13.64483 million on 421,000 shares. The ETF's year-to-date total return of 29.53 per cent as at end-June 2024, and its semi-annual dividend payout ratio of 6.94 per cent over the past year, demonstrates the ETF's attractiveness in terms of dividend payout.
3. Global X Hang Seng High Dividend Yield ETF
GX Hang Seng High Dividend Yield ETF (Code: 03110) is an exchange-traded fund (ETF) managed by Global X Funds Management Limited that seeks to track the performance of the Hang Seng High Dividend Yield Index. Product features include close tracking of the performance of the Hang Seng High Dividend Yield Index (HHDI), diversified constituent coverage, a half-yearly discretionary dividend policy, and screening of low volatility securities to generate lower volatility returns.
As at 14 October 2024, the official net asset value per unit of the listed category is HK$24.41 and the total dividend payout (per share) is HK$1.36, giving an annualised dividend yield of 7.22%. It should be noted that the dividend payout ratio is not guaranteed and dividends may be distributed out of capital or by way of revenue appropriation.
4. Fubon Hang Seng SH-SZ-HK(Selected Corp) High Div Yield Index ETF
Fubon Shanghai-Shenzhen-Hong Kong High Dividend ETF (Code: 03190) is an exchange-traded fund (ETF) managed by Fubon Funds Management (Hong Kong) Limited, which seeks to track the performance of the Hang Seng Shanghai-Shenzhen-Hong Kong High Dividend Yield Index. Its investment objective is to provide investment returns (before fees and expenses) commensurate with the performance of the Hang Seng CSI/HK High Dividend Yield Index (Price Return). The ETF's constituents are carefully selected through four major screening mechanisms to identify 30 high dividend yielding stocks among the 300 largest market capitalisation stocks in Shanghai, Shenzhen and Hong Kong.
Fubon Shanghai-Shenzhen-Hong Kon High Dividend ETF adopts quarterly dividend payout (March, June, September and December) to provide investors with stable dividend income. As of 10 October 2024, the net asset value per unit of the ETF was HK$12.681 and the closing price of trading units was HK$12.740, representing a premium of +0.47%. Investors should note that although the ETF offers a high dividend annualisation rate, dividend payout is not guaranteed and dividends may be paid out of capital, which may result in a reduction in the net asset value per share.
Final thoughts on high dividend ETFs in Hong Kong
Hong Kong high dividend ETFs offer investors an attractive investment option. These high dividend ETFs usually have high dividend yields and can provide good returns for investors seeking stable cash flows. The Hong Kong market provides a wealth of investment underlying high dividend ETFs.
However, investors also need to be alert to potential risks, including increased market volatility, the impact of exchange rate movements, and the possible impact of policy adjustments on specific sectors. When choosing to invest in Hong Kong high dividend ETFs, investors are advised to conduct adequate market research and pay attention to macroeconomic trends.