Standard Chartered: Record-High Dividend Payments Likely In 2022

Standard Chartered note that “China’s dividend season has started; payments are likely to rise sharply from June and peak in July. We estimate that China’s overseas listed companies will pay a total of USD93bn of dividends this year, rising 3.0% Y/Y to a new record high. We expect 96% of these dividend payments to be made by Hong Kong-listed mainland companies (H-shares), and 4% to come from Chinese American Depositary Receipts (ADRs). By quarter, we estimate that 21% will be paid in Q2, 63% in Q3, and 13% in Q4, based on announced dividends and assumptions of additional payments. Historical experience shows that the CNY tends to weaken against both the USD and the CFETS basket in Q2-Q3, possibly partly due to dividend payments. From 2016-21, quarterly CNY depreciation rates against the USD and CFETS basket averaged 0.80% and 0.52% in Q2, and 0.91% and 1.01% in Q3, respectively.”

• “A sharp rise in outbound dividend payments from June will likely add to outflow pressure and support higher USD/CNY levels in the near term. Foreign investors continue to reduce their onshore bond holdings at a near-record pace, and China’s trade surplus may weaken amid higher commodity prices and a weakening export outlook. We see capital outflows persisting in the next few months on growth, monetary policy and interest rate divergence between China and the U.S. But a continuation of China’s zero-COVID policy may also delay the decline in the current account surplus by reducing imports more than exports, and by curbing services trade outflows via outbound tourism. Dividend payment-related FX conversion may also be curbed by Chinese corporates’ near-record-high FX deposits.”
• “We maintain our USD/CNY forecasts at 6.70 for end-Q2 and 6.60 for end-2022.”