China’s dividend plays steal the spotlight as tech euphoria begins to fade
Investors show a shift from growth to value as investors take profits after a torrid year for tech stocks
Chinese investors are taking refuge in high-dividend stocks amid a global sell-off in frothy technology counters, shifting towards value names that have emerged as market outperformers over the past month.
The CSI Dividend Index has gained about 6 per cent since the start of October, making it the best-performing major gauge of Chinese equities in the period. In contrast, the Star Market 50 Index – which tracks tech firms on Shanghai’s Nasdaq-style board – has tumbled more than 5 per cent, while the benchmark CSI 300 Index has been largely flat.
The divergence marks a reversal of a trend that had dominated most of this year, when growth technology names outran value stocks on optimism surrounding China’s advances in artificial intelligence.
That AI-fuelled frenzy is now showing signs of cooling, as investors grow jittery over elevated valuations and question whether earnings can justify the lofty prices.
“We are now seeing a shift in market leadership to those underperformers from the January-October period, such as banks and cyclical companies,” said Zhao Yang, an analyst at Sealand Securities. “Whether this trend continues will depend on greater clarity around next year’s economic policies.”
The Star Market 50 Index currently trades at 66.8 times earnings – more than triple the multiple of the CSI 300 – according to Bloomberg data.