Source: Gelonghui
Focus on dividend strategies
Today, in anticipation of dividend tax cuts, Hong Kong stock high-interest concept stocks have exploded across the board, and sectors such as domestic banking stocks, domestic insurance stocks, and coal are showing active performance.
At the individual stock level, institutions say Hong Kong Stock Connect dividend tax relief$CCB (00939.HK)$Benefiting the most, the stock rose nearly 7%;$CPIC (02601.HK)$An increase of more than 8%,$PING AN (02318.HK)$An increase of nearly 6%;$CHINA SHENHUA (01088.HK)$It rose more than 6% to a record high;$CHINA MOBILE (00941.HK)$It rose nearly 5%, and the stock price reached a record high;$SINOPEC CORP (00386.HK)$An increase of more than 5%.
In the ETF market, Hong Kong Stock Central Enterprise Dividend ETF, Hong Kong Stock Dividend Index ETF, Hang Seng High Dividend ETF, and Hang Seng Dividend ETF are leading the market.
Dividend tax cuts are expected to heat up
Yesterday, Bloomberg released a report saying that regulators are considering reducing the dividend tax on individual investors purchasing Hong Kong stocks through Hong Kong Stock Connect.
People familiar with the matter revealed that the proposal is aimed at avoiding double taxation and making fairer arrangements for investors.
Currently, Hong Kong Stock Connect investors are required to pay 20% income tax when receiving dividends. If they invest in red-chip stocks, the tax rate is higher, up to 28%. However, the investor tax rate for investing through a Hong Kong account is only 10%.
At the same time, due to differences in dividend taxes, investors also receive differences in dividends when investing in companies listed in AH and AH, which has also led to a premium on AH shares to a certain extent.
Although the people familiar with the matter mentioned above said that a final decision has not yet been made, if the dividend tax is reduced in the future, it will be a major benefit, and the market will run away first.
Which industries benefit?
In terms of impact, institutions generally believe that reducing the dividend tax can increase the liquidity of Hong Kong stocks and reduce the premium for AH shares, and that companies with high dividends will benefit.
Bloomberg analyst Marvin Chen said the move will have a “positive” impact on the Hong Kong market, help maintain southbound capital flows, and support high-dividend industries such as energy and utilities.
According to Bloomberg data, the Chinese companies with the highest dividend rate on Hong Kong stocks include China Construction Bank, China Petroleum & Chemical, and Industrial and Commercial Bank. Developers Hang Lung Properties, Henderson Real Estate, and Lingzhan Real Estate Fund are among the Hong Kong companies with the highest dividend returns.
The CICC Research Report pointed out that the current potential adjustment of the Hong Kong Stock Connect dividend tax may be more aimed at mainland individual investors, so potential direct tax relief may be limited. But in the short term, the move helped lift the mood.
According to CICC estimates, the total dividend tax collected by the Hong Kong Stock Connect mechanism is about HK$45 billion each year. Assuming that mainland individual investors account for about 1/4 of Hong Kong Stock Connect's investment, the direct tax relief brought about by this potential adjustment is about HK$10 billion each year.
CICC believes that in the medium to long term, it will help boost the attractiveness of Hong Kong stocks as high-dividend assets, increase the liquidity of Hong Kong stocks, and even help some companies to reduce AH premiums. In terms of target screening, the focus is on dividend potential and balance sheets, not just dividend rates. High dividends may be the result of low stock prices rather than actual dividend capacity, such as real estate and finance. Instead, high dividends value continuous and stable dividend capacity, so cash flow and balance sheet quality are also important considerations.
Huatai Securities believes that the dividend tax not only directly affects the AH premiums of listed companies in the two places, but also indirectly affects the southbound investable value of constituent stocks within the Hong Kong Stock Connect. Industries with a high share of the Hong Kong Stock Exchange and high dividends include energy, materials, capital goods, automobiles and auto parts, and banks. Since then, the investment value of related industry segments with high dividends may increase.
In summary, in the current macroeconomic environment, the downward trend in interest rates is obvious, and the cost performance ratio of dividend strategies is prominent, and it has always been the main line of market rotation.
If a dividend tax reduction policy is implemented, related industries and individual stocks will accelerate their rise, and investors should continue to pay attention to this.
How to find high dividend stocks?
Newcomers can easily find their favorite stocks by going to Discover > Markets > Select Hong Kong Stocks > High Dividend Ratio List.
Editor/jayden