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  • 1 Post By Viktri
  • 2 Post By shri

China banks Dividends: 7+% !!

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  1. #1

    Join Date
    Jul 2011
    Posts
    717

    China banks Dividends: 7+% !!

    Was told that HSBC would be a good investment, now paying 6% in HK, but only 5% in USA. Then i looked at this page
    HSBC HOLDINGS (00005.HK) - Dividend History

    and saw some chinese banks paying more than 7% dividend. Even if shares bought in HK could these investments be considered 'safe' in any way?

    And would HSBC be any better? Sure the share price may fluctuate but if dividends stay at ~6% that would be better than any bank deposits that i know of.


  2. #2

    Join Date
    Dec 2018
    Posts
    634

    I've only looked at the big 4 PRC banks. On paper their capital position looks strong but there is no shortage of commentators claiming that exposure to under performing and defaulting loans is either understated or massively understated. I've got no idea whether this is correct or not but these claims have been made for many years with no indication that they are eventuating.

    As far as dividends are concerned, CCB (the only one I hold) there has been no growth in dividends for the last 5 years. Also there's a 10% withholding tax for HK residents so the net yield is around 5%.

    I basically keep a few companies like this for the income with the possibility of some modest growth over the longer term and there has been a very glacial increase in the share price.

    HSBC (also held for the income) has also been a steady payer offering a nice yield over the time I've held it but also providing only very limited share price appreciation. If you go back longer, the dividend has been less consistent and the share prices has fallen a long way from pre-GFC levels.

    Side note: HSBC pays quarterly while CCB pays annually.


  3. #3

    Join Date
    Feb 2015
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    5,552

    12 years later, HSBC's current annual dividend is still less than half what it was pre-GFC.


  4. #4

    Join Date
    Jul 2011
    Posts
    717

    GFC = Global Financial Crisis.

    Well before my investment considerations.


  5. #5

    Join Date
    Nov 2014
    Posts
    370

    Chinese banks have huge NPL. In the past, the government (at different levels) would step in to assist ailing companies. Most of the loans belong to State owned enterprises (because most banks don't lend to non-SOEs) so their loans, even NPL, aren't seen by Chinese investors are very risky, even despite the fact that defaults on borrowings have gone up a lot the past 2 years (because the government didn't bail out a few companies).

    Investors buying in for the dividend you're basically betting on the status quo or better going forward. Like NPL collections will improve, companies will increase in quality (so cash flow to service loans will improve), exchange rates will improve between RMB:USD, etc. and I'm pretty skeptical... especially as the PRC economy slows, many of the highly levered companies are going to be hit hard so the banks should be disproportionately hurt by a slowing PRC economy.

    I don't think the Chinese bank capital position is strong. I think it's just OK. The PRC government recently actually eased capital requirements - something they wouldn't have done imo if the balance sheets were very robust.

    Quote Originally Posted by traineeinvestor
    I've only looked at the big 4 PRC banks. On paper their capital position looks strong but there is no shortage of commentators claiming that exposure to under performing and defaulting loans is either understated or massively understated. I've got no idea whether this is correct or not but these claims have been made for many years with no indication that they are eventuating.

    As far as dividends are concerned, CCB (the only one I hold) there has been no growth in dividends for the last 5 years. Also there's a 10% withholding tax for HK residents so the net yield is around 5%.

    I basically keep a few companies like this for the income with the possibility of some modest growth over the longer term and there has been a very glacial increase in the share price.

    HSBC (also held for the income) has also been a steady payer offering a nice yield over the time I've held it but also providing only very limited share price appreciation. If you go back longer, the dividend has been less consistent and the share prices has fallen a long way from pre-GFC levels.

    Side note: HSBC pays quarterly while CCB pays annually.
    shri likes this.

  6. #6

    Join Date
    Dec 2002
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    ???
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    27,911

    Also, 6-7% dividend is not uncommon in many countries including HK and with many companies - many of which operate in better regulatory environments in my opinion.

    MandM! and traineeinvestor like this.

  7. #7

    Join Date
    Jul 2004
    Posts
    3,120
    Quote Originally Posted by Viktri
    Chinese banks have huge NPL. In the past, the government (at different levels) would step in to assist ailing companies. Most of the loans belong to State owned enterprises (because most banks don't lend to non-SOEs) so their loans, even NPL, aren't seen by Chinese investors are very risky, even despite the fact that defaults on borrowings have gone up a lot the past 2 years (because the government didn't bail out a few companies).

    Investors buying in for the dividend you're basically betting on the status quo or better going forward. Like NPL collections will improve, companies will increase in quality (so cash flow to service loans will improve), exchange rates will improve between RMB:USD, etc. and I'm pretty skeptical... especially as the PRC economy slows, many of the highly levered companies are going to be hit hard so the banks should be disproportionately hurt by a slowing PRC economy.

    I don't think the Chinese bank capital position is strong. I think it's just OK. The PRC government recently actually eased capital requirements - something they wouldn't have done imo if the balance sheets were very robust.
    Another way to look at is ICBC/BOC are huge dams of China, whenever there is drought in the market (SOE/Private), PBOC will release water from its gigantic reservoir to replenish/flood the market and in the process ensure dams are always full.. For some stale water in the dam, they will use special valve to throw it (write-off) and replenish with fresh water..

  8. #8

    Join Date
    Aug 2019
    Posts
    8

    HSBC is very stable with its dividend and growth of that dividend. Close to 10 years no decreases.
    Same for Hang Seng bank. 0011.HK
    If you are in for the long term, this can be good.
    If you go for the highestest dividend this might not be the best choice.

    I'm no financial professional, but I do watch Dividend Growth listings on the Hong Kong Exchange.