Accessing China's Growth via Dividends

Second, dividends may provide a sign of positive corporate governance in China.  Under the conditions of high concentration of ownership and weak legal protection for small- and medium-sized shareholders in China, the distribution of dividends can be used as a way to limit large shareholders’ ability to expropriate minority shareholders’ rights or improper government intervention in the listed companies.

Third, many of the largest dividend-paying Chinese companies are SOEs with a high degree of direct or indirect government ownership.  Therefore, the Chinese government influences companies’ earnings and dividends.  Given the government support to improve dividend policies, these companies tend to return a greater share of earnings to shareholders via dividends.

The S&P China A Share Dividend Opportunities Index seeks to offer a transparent, rules-based, diversified, and tradable strategy for investors looking for exposure to China’s growth via dividends.  The index seeks to measure high-yielding A share stocks traded on the Shanghai or Shenzhen Stock Exchanges.  The index was launched on Sept. 11, 2008, showing a seven-year live track record of consistent outperformance against the benchmark, the S&P China A BMI (see Exhibit 3).  The index may be attractive to investors for its total return, income generation, and potential for downside protection.  For more information, please refer to the following research paper by clicking here.

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