Stock investors may be able to receive more dividend from mainland-listed firms as China’s securities regulator is said to be launching new rules to encourage dividend distribution, a move that could help bolster confidence in the market.
China Securities Times reported Tuesday that the China Securities Regulatory Commission (CSRC) has prepared a draft document outlining measures that will prompt companies listed in Shanghai and Shenzhen to deliver more dividend to shareholders. The regulator will launch the measures soon, it said.
Following the report, the Shanghai Composite Index jumped 1.92 percent on Tuesday while the Shenzhen Component Index surged 1.91 percent.
According to Securities Times report, the new measures will also provide incentives for the listed companies to better manage their market value and improve their profitability.
So far, more than 70 percent of the 1,090 listed firms that have announced their 2013 results have proposed a dividend payment. Twenty-five companies proposed a dividend with a yield more than the 7-day interest rate offered by Alibaba’s Yu’E Bao online money market fund.
Observers say more listed entities are willing to make dividend payments as the CSRC said last year that companies will have a higher chance of securing approval for financing initiatives if they give more than half of their profits to shareholders. The regulator also said companies that spend less than 30 percent of their profits on dividend distribution will have to provide an explanation.
Some analysts feel small firms will be at a disadvantage due to CSRC’s measures. Large players that have an advantage in cash flow and can afford a higher dividend payout ratio will enjoy more funding from the capital markets. Smaller entities that they really cannot afford to pay dividend might suffer.
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