JAKARTA (TheInsiderStories) – IHS Markit projects aggregate dividend payouts from corporations in Asia-Pacific (APAC) region to remain relatively resilient amid the COVID-19 pandemic, led by mainland China and Hong Kong SAR.
The aggregate dividends in APAC are projected to be US$534.9 billion in 2020, down 2 percent from 2019, well below the global average 9 percent contraction. In comparison, Europe and the Middle East is forecast to see a drop of 21 percent in 2020 dividends and the Americas a decline of 5 percent.
Mainland China and Hong Kong SAR are forecast to maintain solid growth in 2020 dividends, with corporations in mainland China expected to distribute aggregate dividends of $128.1 billion in 2020, a rise of 4 percent compared to last year (YoY) in US Dollar terms or 7 percent in the Chinese Renmimbi. Those in Hong Kong are expected to pay $111.5 billion for dividends in 2020, up 7 percen YoY in US Dollar terms or 5 percent in Hong Kong Dollar terms.
The growth in both mainland China and Hong Kong is mostly attributed to the banking sector led by big four state-owned banks (Industrial and Commercial Bank of China, China Construction Bank, Agriculture Bank of China and the Bank of China). Also, Hong Kong’ real estate sector, driven by property developers such as China Evergrande and Sun Hung Kai, is expected to see a 22 percent hike in 2020 dividends, despite unfavorable market condition.
The real estate sector in Hong Kong has solid cash balances and the practice of paying out stable to rising dividends even when earnings turn south. Mainland China is expected to continue to show strong dividends payout in 2021 on the back of continued growth and long-term profitability coupled with regulatory push to encourage profit distribution.
Japan is projected to pay out $127.3 billion dividends in 2020, a drop of 2 percent YoY in US Dollar terms and 3 percent in the Japanese Yen terms, as many companies stay committed to reward shareholders through dividend distribution despite the pain of COIVD-19.
In APAC, Australia is expected to see the highest downfall in dividends in 2020 – a 23.6 percent drop in US Dollar terms or 19 percent cut in local currency, due to the banking sector limiting and deferring dividends in the face of the economic uncertainties resulted by COVID-19.
Dividends from companies in Taiwan and South Korea are forecast to contract by 12 percent and 6 percent in local currencies in 2020, respectively, due to semiconductor manufacturers’ sluggish performance amid the industry down cycle last year. However, IHS Markit sees limited impact on their 2021 dividends on the back of rebound in technology sector this year.
Within IHS Markit coverage, 150 companies from mainland China and 111 firms from Hong Kong SAR postponed their annual shareholders meetings. Singapore had experienced high level of uncertainties until virtual AGM was allowed by its parliament on April 7. Companies in Thailand and Malaysia re-classified their fiscal year 2019 final dividends as interim dividends, which do not require shareholders’ approval.
By Kar Mun Fan and Stella Lim from IHS Markit