Chinese Banks Thrive Amid Market Uncertainty: Investors Flock to Dividend Yields, Outpacing Benchmark Stock Index

Amidst market chaos, Chinese banks remain resilient as stock investors seek dividend returns. Spearheaded by ICBC, CCB, ABC, and BOC, 42 banks listed on the mainland have seen an average increase of 19 per cent this year, significantly outperforming the standard stock index.

The 42 banks listed on the mainland have experienced an average increase of 19 per cent since the beginning of 2024, as reported by Shanghai DZH, a financial data service. This significantly outperforms a 4.2 per cent decrease in the standard CSI 300 Index during the same timeframe.

The major four government-owned banks have spearheaded this extraordinary surge. The Industrial and Commercial Bank of China (ICBC), the largest of the group, along with the China Construction Bank (CCB) have both achieved values unseen since 2018. Meanwhile, the Agricultural Bank of China (ABC) has reached an all-time high, and the Bank of China's share price has climbed to its highest point since 2015.

Banks are usually viewed as a reflection of the economy, and their consistent dividend returns, despite a shortage of assets, are fueling their superior performance. The inconsistent economic revival in China has led investors to invest heavily in bonds, which reduced the return on the standard 10-year government debt to an all-time low of 2.124% this month. This is just half of the average dividend distributions of the four major banks.

"Large banks, including the top four, offer appealing dividend yields," noted Lin Rongxiong, a market analyst at SDIC Securities. "Looking specifically at the top four banks, their average dividend yields hover around 5 per cent. Currently, the difference between their yields and the yield of a 10-year government bond has reached an unprecedented level."