Advertisement
Macroscope | China’s equities and bonds are still undervalued as investment opportunities
Lilian Leung says although China is heralded as a success story for its growth, investors don’t fully appreciate the potential of its financial, energy and bond markets over the next few years
Reading Time:3 minutes
Why you can trust SCMP
China is well known globally as a growth story, but investors may be overlooking its vast income potential across both equities and bonds. With ongoing corporate reform and the MSCI China A-shares inclusion in June, as well as the local currency bond inclusion in Bloomberg Barclays Global Aggregate Index next year, it is expected that the income universe will further expand and attract more attention globally.
For a few years now, the Chinese government and regulators have been encouraging companies to pay out more as dividends and a dividend culture is now building up. In the 2017 results season, companies listed in Shanghai broke records in terms of dividend distribution – total amount distributed; the number of companies paying out dividends; and, the dividend-payout ratio.
Across both onshore and offshore China equities, some 60 to 70 per cent of the companies are paying a dividend and, based on current valuations, more than 500 names are trading at or above 2 per cent dividend yield. We’ve seen encouraging and interesting examples in the past 12 to 18 months of home appliances, insurance and energy companies raising their dividends.
Advertisement
Going forward, investor demand is also expected to be a force to reckon with. With more foreign investors coming in, long-term local institutional investors taking part and pensions seeking income sources, the appetite for steady dividends should underpin the growing tailwind for equity income investing in China.
Watch: China pledges to allow more foreign investment in financial sector
Advertisement
Select Voice
Choose your listening speed
Get through articles 2x faster
1.25x
250 WPM
Slow
Average
Fast
1.25x