Chinese stocks with high dividend yields are gaining popularity among investors due to a lackluster economic outlook that is not encouraging a shift to growth stocks just yet. A Shanghai-traded equities index known for its high dividend payouts surged 2.4% on Monday, reaching its highest ratio against the ChiNext Index since 2019. The rally was led by banking and energy shares, with Industrial and Commercial Bank of China Ltd. hitting a four-year high, and China Shenhua Energy Co. reaching levels not seen since 2008.
Investor confidence has been shaken by recent signs of a faltering economic recovery, including a second consecutive month of contraction in factory activity in June. Despite a private survey showing factory activity at a three-year high, concerns persist about China’s growth prospects as manufacturer confidence continues to decline.
The trend towards high dividend-yielding stocks reflects a cautious approach by investors amid uncertain economic conditions.