China Dividend ETFs Soar as Investors Ditch Bonds
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Chinese investors are flocking to dividend-paying stocks as 2024 draws to a close, propelling two of the largest dividend exchange-traded funds (ETFs) in the country to record-breaking inflows, reports Bloomberg.
The Huatai PB CSI Bonus Low Fluctuation ETF and Huatai-PineBridge SSE Dividend Index ETF saw a combined 9.4 billion yuan (£1 billion) enter their coffers in December, marking an all-time high for both funds, according to Bloomberg-compiled data. These two ETFs were among the biggest beneficiaries of a surge in dividend ETF buying throughout 2024.
This shift in investor sentiment is evident in the contrasting performance of fixed-income ETFs, which have seen outflows. This divergence suggests that investors are pivoting from government bonds, previously favored due to China's easing monetary policy, to dividend stocks in search of higher returns.
"Insurance funds typically heavy in fixed income products are under pressure to deliver with the lower yields, and they are likely to increase exposure to high dividend and high return-on-equity stocks to enhance returns," Guosen Securities analysts, including Sun Xiang, wrote in a note cited by Bloomberg.
However, the rapid growth of dividend ETFs carries risks of overheating. The Huatai-PineBridge Hang Seng SCHK High Dividend Low Volatility ETF and Guotai CSI Hong Kong Connect High Dividend Yield Investment ETF both plunged 10% on Friday after a brief suspension triggered by their fund premiums reaching 15%.
The Shanghai Stock Exchange Dividend Index, currently yielding 5.4%, has already gained 13% in 2024, reflecting the strong demand for dividend-paying stocks.