Record dividends in China add pressure on the yuan

 China’s ambitious campaign to revive the faltering stock market has made the yuan currency… An unintended victim, as record dividends led to outflows.

Bloomberg news agency reported: Interim dividends paid by Chinese companies listed on the Hong Kong Stock Exchange are scheduled to reach $12.9 billion between next January and March, a record level for the first quarter, according to data compiled by the news agency.

 

This comes at a time when fourth-quarter levels have already exceeded $16.2 billion, which is the highest level ever during the period and an increase of 47% compared to last year.

The richness of profits also adds pressure on The Chinese yuan is already weighed down by the high value of the dollar and the possibility of growing tensions between the United States and China.

 

Companies mostly pay their dividends in Hong Kong dollars, but earn the majority of their revenues in yuan, which Requires conversion. The impending outflows will test Beijing’s ability to stabilize the market in the short term without compromising longer-term goals in the world’s second-largest economy, which is especially important as policymakers also step up efforts to defend the currency, which is currently hovering near its lowest point. Their levels in one year.

 

The high demand for foreign currencies can mostly be due to dividend flows, with many Hong Kong-listed companies offering dividends. Temporary.

Chinese companies have been working to boost cash payments to investors since the authorities unveiled a capital market reform plan, which is held once every decade in April. This included encouraging dividend distribution, improving the quality of listings and improving corporate governance.

 

Against the backdrop of an unprecedented $118 billion in dividends paid in 2024, interim payments from member companies of China’s Hang Seng Index of state-owned enterprises are expected to reach… Record total $9.7 billion in the first quarter as well.

 

Buying shares of state-owned companies was also one of the hottest stock deals this year until late last September, when it inspired a stimulus campaign led by the bank. The central bank rose more broadly, and the Hang Seng index of state-owned enterprises rose 23% this year, outpacing a 16% gain in the broader benchmark CSI 300 index.

 

Despite the large payout amount in the fourth quarter, the dollar amount is small compared to the third quarter, when dividends are typically distributed for the full year.. This year, During the three months until last September, $74 billion.

 

Regulators have since stressed the importance of companies enhancing their cash distributions, with increased frequency and visibility as an essential part of enhancing shareholder returns. These encouragements may be transformed To an opportunity for those who expect further gains for the stock market, even if it turns into a double-edged sword for the yuan.

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