Hong Kong-listed Chinese companies are prepaying their dividend payments to the second quarter, a strategic move that may ease pressure on the yuan and reduce foreign exchange volatility.
According to Bloomberg figures, payments of dividends during the April–June quarter are projected to amount to $36.1 billion—almost double the historical norm for the previous nine years. As a result, third-quarter payouts will likely plunge.
"It's extremely probable these final dividends are being advanced to counteract the FX pressure and mitigate downward pressure on the yuan," said Wu Xuan of Borui Funds Management Co.
They are mostly denominated in yuan but pay dividends in Hong Kong dollars, requiring currency exchange that can place downward pressure on the onshore yuan. The yuan already has fallen 2% in the past half-year as it continues to struggle through the typical trade tensions, such as the newly-imposed 145% tariff hike by U.S. goods on Chinese announced by former President Donald Trump.
Regulatory imperatives may be driving the trend as well. A State Council directive last year encouraged improved shareholder returns, and mid-year payment of dividends has been encouraged. Chinese banks lead the way in the shift: China Construction Bank will pay $6.8 billion in May—earlier than before. Bank of China, Bank of Communications, and Postal Savings Bank have also pushed forward payouts from Q3 to Q2.
Whereas others are yet to announce payment dates, some of the record Q2 payout contributors this year are:
- Tencent Holdings Ltd.: \$5.33 billion (up 33% YoY)
- JD.com Inc.: \$1.46 billion
- China Hongqiao Group Ltd.: \$1.24 billion
Others like China Mobile Ltd. and Ping An Insurance will typically pay interim dividends in the second half, which would cushion the expected Q3 fall upon confirmation.
"It's also said that part of these changes is also a wager on expected FX volatility," said Kok Hoong Wong of Maybank Securities.
Trade news is still the number one driver of market sentiment across Asia. While recent signals of possible U.S.-China trade talks imply possible forward movement, a resolution remains months away.