The Hang Seng index might not have matched the performance of S&P500, but it still delivered a nearly 20% in 2024, closing the year above the 20,000-point mark.
Despite the short-lived rally that sputtered rather quickly in September 2024, there are blue-chip HSI component stocks that have beaten the S&P500’s performance. Meaning these stocks have actually rallied at least 30% and boasts a dividend yield 5% or more.
Definitely trading at cheaper valuations that SG banks as well!
Here are the 8 China blue chips that have actually trumped the HSI while offering mouth-watering dividend yields.
1. China Hongqiao Group Ltd (HKG: 1378)
Aluminium prices are on a run, albeit not as crazy as coffee prices. And companies like China Hongqiao, that operates in the aluminium value chain, have benefited from the rally.
Their business covers the entire aluminium industry chain from bauxite mining to aluminium processing, while primarily focusing on aluminium production. It is not only one of the largest aluminium companies in the world but also the largest in China.
The commodity business is notoriously cyclical, and that is visible from China Hongqiao’s historical earnings per share track record. With aluminium prices remaining at elevated levels due to increased demand, earnings have improved for FY 2023.
Share prices have rallied +86% in 2024, and it sports a dividend yield of 7.4%.
2. China Unicom Hong Kong Ltd (HKG: 0762)
The telco business investment thesis may have been an enticing investment opportunity 10 to 20 years ago in various countries. But today it remains a red ocean industry with plenty of competition and little to no customer loyalty in data and plan subscriptions.
However, this situation is different in China, at least for China Unicom. Despite primarily operating in China and Hong Kong, this telco is one of the biggest in China, and is still growing rather steadily. Earnings per share have grown by 13% CAGR over the last 5 years, with dividends per share growing by 21% CAGR in the same tenure.
The company also benefits from a cloud and data centre catalyst. So it is not surprising to see share price up by 55% YTD, and trading at a dividend yield of 5.6%.
3. China Merchants Bank (HKG: 3968)
Even though CMB is smaller and less well known compared to its “Big Four” China bank peers, it still packs a punch with its total shareholder returns in 2024.
CMB, albeit being the 7th largest bank in China, is still the 25th largest bank in the world, ahead of other banks like Deutsche Bank AG (ETR: DBK) and Morgan Stanley (NYSE: MS).
Total revenue has been growing steadily for the past 6 years, with the bank logging in consecutive growth in its earnings per share and dividends per share too.telco
YTD wise, shares have risen by 51%. It currently trades at 0.91x P/B ratio, and a decent dividend yield of 5.5%.
4. CNOOC Ltd (HKG: 0883)
One of China’s largest national oil companies, China National Offshore Oil Corporation Ltd, more commonly known as CNOOC Ltd, is the major subsidiary of its parent company CNOOC. Its primary focus is in offshore upstream exploration and production of crude oil and natural gas but also maintains a key presence in onshore exploration and production and refining as well.
Most of its share price run up last year were due to discovery of the world’s biggest ultrashallow, ultra deep offshore gas reservoir and ramping up of its production from Panyu oil fields.
Company share prices were up around +40% in 2024 due to better EPS and DPS and is currently trading at a trailing dividend yield of 7.36%. Not bad for a long-term play despite the cyclicality and volatile nature of the crude oil and natural gas.
5. China Construction Bank Corporation (HKG: 0939)
CCB, one of the “Big Four” banks in China, and the third largest bank in the world by total assets as of time of writing.
It’s size and presence in China and globally, allows it to operate in various banking facets – from consumer, corporate, investment and even private banking and private equity.
The China economic strength might still be lukewarm as of now, clearly exhibited in CCB’s revenue growth slowdown. But earnings and dividends per share wise, the bank is still registering moderate growth, pushing share prices up by +31% in 2024. It currently trades at a dividend yield 7.17% and a price-to-book value of 0.44x.
6. Industrial and Commercial Bank of China (HKG: 1398)
The Industrial and Commercial Bank of China (ICBC) stands as the largest bank in the world by assets, playing a pivotal role in China’s financial system and holding significant global influence.
While operating with a commercial focus, just like most of the Chinese banks, the Chinese government maintains majority ownership, reflecting its strategic importance within the nation’s economy. ICBC provides a comprehensive suite of financial products and services, catering to a vast clientele encompassing individuals, corporations, and institutions, both domestically and internationally.
Revenue wise the bank might be showing signs of slowdown due to the uncertainty in the Chinese economy over the past 2 years, but earnings and dividends per share wise, ICBC still manages to eke out growth.
It trades at a dividend yield of 9.5% and a price-to-book ratio of 0.44x. Share prices returned around +30% in 2024.
7. Bank of China Ltd (HKG: 3988)
The Bank of China (BOC) holds a unique position in the Chinese banking sector, distinguished by its long history and strong international focus. Established in 1912, BOC is one of the oldest banks in China, with roots tracing back to the Qing Dynasty.
It is the world’s fourth largest bank by total assets, and is a member of China’s “Big Four”.
Due to its sheer size, it is involved in almost all banking sectors, covering the consumers and the high net worth individuals and corporates.
Just like ICBC, its total revenue growth has been erratic over the past 2 years, but it has still managed to grow its earnings and dividends per share.
The stimulus plan offered by the CCP on top of its resilience, saw share prices of the bank grow by +32% in 2024. It trades at a dividend yield of 10.1% and a price-to-book of 0.44 too.
8. Ping An Insurance (Group) Company of China, Ltd. (HKG: 2318)
Those who have been to Shenzhen would find the above skyscraper familiar. It is the headquarters of Ping An (Group), a full-fledged insurance, banking and financial service conglomerate.
It is one of the most tech embracing and sophisticated financial institutions – having technology subsidiaries that complement its traditional insurance underwriting businesses. It is also the world’s 4th largest insurers by total assets, trailing only Allianz SE (FWB: ALV), Berkshire Hathaway Inc (NYSE: BRK.A; BRK.B), Prudential Financial, Inc, (NYSE: PRU).
Compared to traditional banks, Ping An’s revenue was more aversely affected over the past 2 years due to lower investment income and lower gross written premiums. But for the latest 9 months of 2024, profits surged due to growth in its core segments – life and health insurance, property and casualty insurance. Diluted EPS might have tapered down over the last 3 years, but dividends per share is still growing well, with payout ratio around 50-60%.
The company’s share price surged almost +30% in 2024. Share prices are considered to be in premium valuation range – trading at 0.9x price-to-book and a dividend yield of just 6%.
Consensus and verdict
Yes the Hang Seng index doesn’t seem to be on a long-term bull run. There have been bursts of sprints but those sprints have quickly tapered down. That said, some stocks have clearly beaten the S&P500 hands down, while offering a much more enticing yield as well.
The HK market has clearly and will continue to be overlooked, until liquidity, mainly from the West starts pouring back to the HK markets. Else the big picture will still be uncertain and unpredictable.
But that does not mean that the overall HK market is un-investable. Sometimes, the best place to fish, is in a quiet and undiscovered spot, rather than spots that are already getting crowded.
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