China companies pay out record dividends amid market plunge
Chinese companies are poised to pay out record dividends this year as they step up efforts to boost investor confidence amid an outflow of foreign funds.
Dividend payments by the nation’s biggest firms have amounted to 1.5 trillion yuan (S$280.4 billion) so far this year, surpassing the 1.27 trillion yuan given out last year.
That has helped dividend yields for companies on the CSI 300 Index to surpass 10-year sovereign bond yields for the first time.
The higher dividends are part of a wider trend by companies to revive sentiment as the rout in Chinese markets extends. Hong Kong-listed firms are also increasing share buybacks in a bid to lift valuations.
The CSI 300 Index has fallen nearly 12 per cent from a peak in January. Offshore Chinese stocks, meanwhile, are among some of the world’s worst performers this year, as investors dumped shares over concerns of rising defaults in the property sector and a slow recovery in consumption after the pandemic.
Leading the dividend payouts this year are some of China’s biggest state-owned banks, Bloomberg-compiled data shows. They are followed by oil producer $Petrochina (601857.SH)$ and liquor maker $Kweichow Moutai (600519.SH)$.
Firms may further increase their payouts after the country’s securities watchdog recently urged domestic companies to pay good dividends. Those that do not meet a certain payout ratio will be asked for an explanation, the Shanghai Securities Journal reported on Tuesday (Sep 19).
“In the A-share market, it’s definitely a good move, given the long history of low cash dividends in the past,” said Willer Chen, senior research analyst at Forsyth Barr Asia.
“The strict move by the regulators should boost the dividend to some extent in the future, but still, the fundamentals matter more at this moment.”
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