Chinese flag flying with Lujiaceh financial district in the background.
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Amid strict corporate governance reforms, Chinese companies are luring investors to have record dividend spending and stock buybacks, and some market observers say more is coming.
Last year, Chinese listed companies paid a record 240,000 yuan ($328 billion) dividend. Data from China Securities Regulatory Commission (CSRC). In addition, the company also repurchased 147.6 billion yuan worth of shares, the highest in history.
Goldman Sachs estimates that the bank’s Chinese equity strategist Kinger Lau wrote in a note published in early February that Chinese companies could reach $35 trillion in cash allocation this year to reach a new high.
Herald van der Linde, an Asian equity strategist at HSBC, echoed a similar view when asked about the prospect of another year’s record dividend.
“I think they’ll go on. Companies don’t know where to put their cash. They won’t get much from the bank, so they return it to shareholders. It’s a big change in mindset,” he said.
More than 310 companies are expected to allocate dividends of more than 340 billion yuan in December and January 2024, marking a 9-fold increase in the number of companies paying dividends, compared with the previous period, in the same period Total payments increased by 7.6 times. Year, CSRC added in the declaration.
Goldman Sachs data shows that dividend yields in Chinese stocks have also climbed to around 3%, the highest level in nearly a decade.
China’s stock output is high Beyond those Emerging markets in Asia According to the index data, it is about 15%.
Government priorities
HSBC’s Van der Linde said the Chinese government has been actively promoting companies to pay higher shareholder returns by offering them tax benefits.
Improving shareholder returns has become a priority for the State Council and CSRC. In October last year, China’s central bank Launched RMB 300 billion Targeted retention programs help listed companies and major shareholders buy back shares. In April 2024, regulators also strengthened stock listing standards, reduced illegal share sales, and Strengthened dividend expenditure regulations.
In August last year, 677 listed companies reported cash dividend plans, up from the same period last year in 2023. Data from the China Listed Companies Association.
This is greatly driven by Beijing to improve company efficiency. When Beijing says jump, state-owned enterprises say, “How high is it?”
Jason Hsu
Rayliant Global Consultant
State-owned enterprises. especially. have Always at the forefront Allianz global investors point to this surge in dividend spending and stock buybacks. Some famous companies include Petrochina, among which Dividend yield is about 8%The yield in the and CNOOC group was 7.54%.
“This is the driving force behind Beijing. Chinese companies with favorable loan rates provide funding for dividend boosts,” said Jason Hsu, founder and chairman of Rayliant Global Advisors.
Private companies are also increasing cash spending. For example, e-commerce giant JD.com $5 billion in purchases were approved in September within three yearsexcept for its 1.9% dividend yield.
HSU told CNBC that, especially for large companies, investors can count on more record dividend spending, especially from the state-owned behemoth.
However, China’s dividend payment ratio measures dividends from the company’s net income, but still lags behind some Asian counterparts.
As of late January, China’s dividend payment ratio was 52.58% According to data compiled by Reuters and LSEG. Although higher than Japan’s 36.12%, South Korea’s 27.6% still lags Australia’s 89.2% and Singapore’s 78.13%.
Attract locals to return to the stock market
Le Xia, chief economist at BBVA Research Asia, said the government’s high-risk spending payments have promoted Chinese stocks, while also attracting long-term investors from domestic and foreign markets.
However, this may also mean more cash expenditures from China to offshore markets, which may put some pressure on the Chinese yuan.
Higher dividend expenses are beneficial for placing local investors in the short term because there is “in fact nowhere else to take money” besides golds Shaun Rein, managing director of the China Market Research Group, said the country’s real estate and stock markets still exist.
Sentiment around China’s economy and market It’s been very bad in recent years. one The initial surge In the country’s benchmark CSI 300, an outbreak triggered by a series of government measures introduced in September.
“The easy way to look at it, you should get enough salary in dividends or some other common action to get you covered the fact that the valuation may not happen,” said Julius Baer’s chief investment officer in Asia. ” , Bhaskar Laxminarayan.
He said investors are paying their patience. “If not, it’s not worth it.”
The dividends put cash into households, and attractive yields will bring investors back to stock markets, especially those seeking alternatives to deposit-bank deposit alternatives, said Rayliant Global Advisors HSU.
“It’s a good deal to get very high limit yields while waiting for the (a) catalyst,” HSU said.
