(Bloomberg) — China’s ambitious campaign to revive its flagging stock market has made the yuan an unintended casualty, with record dividend payouts leading to outflows.
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Interim dividends paid by Hong Kong-listed Chinese firms are set to reach $12.9 billion between January and March, a record level for the first quarter, according to Bloomberg-compiled data. That comes as fourth quarter levels have already topped $16.2 billion, the most ever for the period and up 47% compared with a year ago.
The dividend bonanza is adding pressure on the Chinese yuan already weighed by a resurgent dollar and the prospect of growing US-China tensions. The firms mostly pay dividends in Hong Kong dollars but earn the majority of their revenues in the yuan, which requires conversion.
The looming outflows will test Beijing’s ability to achieve short-term market stability without compromising longer term goals in the world’s No 2 economy. That’s especially important as policymakers also ramp up efforts to defend the currency currently hovering near one-year lows.
The higher client demand for foreign currency can mostly be pinned on dividend flows as many Hong Kong-listed firms introduce interim dividends, said Xing Zhaopeng, a senior strategist at Australia & New Zealand Banking Group Ltd. “The increase in both the frequency and the net amount of dividends will continue to weigh as firms convert to other currencies for payment.”
Chinese firms have been boosting cash payouts to investors since authorities unveiled a once-in-a-decade capital-market reform plan in April. That included encouraging dividend distribution, better quality listings and corporate governance improvements. The blueprint triggered a rally in state-owned enterprises, many of which have a dual listing in Hong Kong and are among the most responsive to Beijing’s call to enhance shareholder returns.
On the back of an unprecedented $118 billion of dividends paid in 2024, interim payouts from the Hang Seng China Central SOEs Index’s member firms are expected to reach a record total of $9.7 billion in the first quarter as well. Among them, China Construction Bank Corp. is poised to hand out $6.5 billion – its first interim payment since 2008 – in late January.
China Mobile Ltd.’s chunky interim distribution of $6.9 billion in September marked a 7% increase from the same period last year. CNOOC Ltd., also an investor darling for its hefty payouts, doled out nearly 26% more on year in interim dividends in 2024, according to data compiled by Bloomberg.
