The Upside to Asian Stock Declines? Better Dividends
Large-cap Asian stocks such as banks and property developers in Hong Kong and Singapore have declined so much over the past 12 months that they are now paying their best dividends in years, traders say.
They add that as markets are expected to remain volatile in the coming months, investors should seek safety in counters such as these that pay out a steady income.
In Hong Kong, state-owned Industrial and Commercial Bank of Chinahas declined about 26.8 percent to HK$4.73 (61 US cents) over the past 12 months, and is now yielding 5.9 percent. Singapore’s DBS Group , Southeast Asia’s largest lender, has declined nearly 10.1 percent to S$13.34 ($10.44) and is yielding about 5 percent.
Among property counters in Singapore, Keppel Landhas lost 27.4 percent of its value over the past 12 months to close at S$2.92 on Tuesday. It now has a dividend yield of 6.9 percent. Guocolandhas declined 28.5 percent to S$1.60 and is now yielding 5.1 percent.
Jake Chow, Associate Vice President of Dealing at the brokerage CIMB Securities in Singapore said these counters are looking very attractive after the selloff and provide good income even if the rest of the market continues to be volatile.
“These stocks are paying their best dividends in years and it may get better,” Chow said. “If the market collapses and (Singapore Telecom ) drops to S$2.50 per share, the dividend yield will go up to 6.5 percent, 6.8 percent.”
Dickie Wong, Executive Director of Kingston Securities in Hong Kong, says that yields are what investors should be looking at because bank deposit rates are likely to remain low. He favors Hong Kong-listed banks and real estate investment trusts.
“These are really good stocks, and the more their prices fall, the higher the yields go up,” Wong said. “Also, the average yield on the 48 components of the Hang Seng Indexis more than 3 percent so that’s really quite attractive considering what you can get for your deposits.”
The bank deposit rate on a savings account in Singapore is 0.01 percent per year while the rate in Hong Kong is 0.0010 percent, according to information on HSBC Bank’s web site.
However, analysts caution that there could be more downside to Asian stock markets, and investors may want to wait and watch.
“My only concern would be timing,” said Justin Harper, Market Strategist at IG Markets in Singapore. “The euro zone crisis is likely to remain for the foreseeable future and presents plenty of downside risks for Singapore. While I think it makes sense to put a few high-yield stocks on your radar screen, monitor them for the time being to spot for any further falls and agree to a decent entry price.”
By CNBC’s Jean Chua.