Chinese traders chase riskier stocks once more as country emerges from lockdown, while global funds seek safety in high-dividend shares
- The decoupling signals a rapid increase in risk appetite in the world’s second-largest stock market, as Beijing shifts focus to restoring growth after containing the Covid-19 outbreak
- Chinese technology stocks have been leading gains on the broader market as Beijing calls for new infrastructure investment to prop up growth
As the coronavirus pandemic rattles markets, global fund managers have been seeking safety in high-dividend stocks, prized for their stability during turbulent times. But Chinese traders are doing the opposite, once again chasing companies that are used to big price swings.
While exchange-traded funds focusing on companies with the best history of dividend payouts have posted some of the largest gains recently worldwide, an index of 50 such stocks on the Shanghai exchange has been lagging behind the benchmark this month.
A gauge of smaller technology companies has been outperforming any other industry group.
The decoupling signals a rapid increase in risk appetite in the world’s second-largest stock market, as Beijing shifts focus to restoring growth after containing the Covid-19 outbreak. Dip buyers are betting that Chinese stocks that are 25 per cent cheaper than their US peers in valuation have already troughed.
Adding fuel to the rally in riskier, more volatile technology stocks was a recent initiative by top policymakers to spur investment in so-called new infrastructure, such as the fifth-generation (5G) wireless network, cloud computing and internal data centres, to counter the economic slowdown.
“It’s sort of a risk-on mode,” said Wang Zheng, chief investment officer at Jingxi Investment Management in Shanghai. “China is doing much better in getting the coronavirus under control than other countries in the world now, which has been reflected in the performance of risk assets.”
The Shanghai Stock Exchange Dividend Index of 50 high-dividend constituents including electricity producer China Yangtze Power and Industrial and Commercial Bank of China has risen 1.8 per cent in April, trailing a 2.8 per cent gain in the Shanghai Composite Index. The CSI technology sub-index has rallied 7.6 per cent.