SAIC Rises With Daqin as China Dividend Lures Investors

Updated on

SAIC Motor Corp. and Daqin Railway Co. rose to the highest levels in at least three years in Shanghai as investors sought mainland shares with high dividend yields on the first day of the exchange link with Hong Kong.

SAIC Motor, the nation’s biggest automaker, climbed 3.2 percent at the 3 p.m. close, the highest level since April 2011. Daqin Railway rallied 6.2 percent to the highest level since April 2010. SAIC Motor has a dividend yield of 6.2 percent, while Daqin Railway’s yield is 4.5 percent. Goldman Sachs Group Inc. and Standard Chartered Plc recommended Daqin Railway shares as link plays, while SAIC Motor was preferred by UBS AG and Citigroup Inc.

“Yields are obviously more attractive to the international community than retail-focused A-share investors focused on growth and news-flow driven stories,” said Robert Buckley, the managing partner for Asia at Aviate Global LLP. “Daqin Railway is one of the stand-out names of interest today given its cheap valuation, strong dividend yield, strong cash generation and potential for a tariff hike in the first half of 2015.”

The Shanghai Composite Index, which has an average yield of 2.7 percent for its 1,022 companies, slipped 0.2 percent today. The full daily quota for international investors buying China shares was filled, compared with 14 percent for mainland investors purchasing Hong Kong shares.

Chinese consumer companies were in demand, with Kweichow Moutai Co., the biggest baijiu liquor maker, adding 1.8 percent.

Moutai Rallies

“For foreign investors, they like the sectors such as white liquor because of their stable and sustainable net cash flows,” said Li Yaming, an analyst at Sealand Securities Co. “It’s the right time to invest in the white liquor sector because of its scarcity relative to the Hong Kong market.”

The start of the link today gives foreign investors unprecedented access to China’s $4.2 trillion stock market. The program will allow a net 23.5 billion yuan of daily cross-border purchases. China will temporarily waive capital gains tax for foreign investors buying mainland equities through the connect, according to a statement released by the Finance Ministry on Nov. 14.