Investing.com — A trend of increasing shareholder returns among Chinese companies, especially through dividends and buybacks, is taking shape in China, Goldman Sachs analysts wrote in a note.
GS said it was bullish on the issue of shareholder returns in Chinese stocks, noting that the trend had been a “rewarding strategy” since 2021. GS said Chinese listed companies had generated revenues of more than 2 trillion yuan ($280 billion) each year over the past three years. . Years.
Huge dividends and buybacks have kept some brokerages bullish on Chinese markets, even as broader valuations have fallen significantly as China’s post-coronavirus economic recovery has largely failed. The benchmark index and Chinese indices fell to pre-Covid-19 lows earlier in 2024, although they have rebounded from the levels.
GS said it remains optimistic about Chinese shareholder returns on the back of the potential for a strong political push from Beijing to improve returns, with reforms to Chinese state-owned enterprises (SOEs) reflecting this idea.
Chinese companies also have strong cash balances and cash flows, and retain the ability to maintain shareholder returns despite near-term economic headwinds.
GS also presented dividend income from Chinese companies as stable income, which is attractive in the face of rising global interest rates and increasing economic uncertainty.
In addition, low participation rates in Chinese markets presented the potential for increased value through increased participation by institutional investors. Deleveraging from the property market, following a prolonged decline in the sector, could also provide diversification opportunities in Chinese stocks.
GS Overweight on China TMT, state-owned enterprises
The brokerage reiterated that it was overly focused on China’s technology, media and telecommunications sector, and was also biased towards “high-quality” state-owned companies. Its bullish outlook on strong shareholder returns also factored into its stance.
Top brokerage picks include technology giants Tencent Holdings Ltd (HK:), JD.com (NASDAQ:) (HK:) and BYD Co Ltd (HK:), and financial services including Industrial and Commercial Bank of China Limited (SS:) and Bank of China. China Ltd (SS:), along with a group of automakers, consumer staples and utility stocks.
