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Chinese Investors Hunting for Yield Running Out of Options

  • Shanghai index of high-dividend stocks is outperforming
  • Spread between dividend yields and bond rates is narrowing
Pedestrians holding umbrellas walk as the Oriental Pearl Tower, right, stands illuminated at night in the Lujiazui district of Shanghai.

Pedestrians holding umbrellas walk as the Oriental Pearl Tower, right, stands illuminated at night in the Lujiazui district of Shanghai.

Photographer: Qilai Shen/Bloomberg
Updated on

As China’s sovereign bond yields tumble to decade-lows, investors are piling into the most defensive part of the stock market in search of returns.

The Shanghai Stock Exchange Dividend Index, composed largely of banks, utilities and expressway operators, has rallied 5.6 percent in the past month and climbed to the highest level versus the Shanghai Composite Index in a year on Aug. 12. The 50-member gauge returns 3.6 percent in dividends, compared with 2.7 percent for 10-year sovereign debt and 2 percent for the benchmark equity measure.