Investors are ploughing money into shares of China’s state-run enterprises as they seek a haven from weakness in the Chinese economy and better returns than those offered by the country’s government bond market. Since the start of April, shares in government-run banks have rocketed with state lenders Bank of China and Industrial and Commercial Bank of China up more than 20 and 10 per cent, respectively, in a rare rally for the country’s bank shares.
More generally, Hong Kong’s Hang Seng Red Chips index of state-run enterprises has climbed about 10 percentage points this year compared with a slight loss for the broader Hang Seng China Enterprises index.
The rally in SOE stocks reflects a hunt for higher dividend yield, analysts said, as a range of China-focused investors lose their appetite for government bond yields that have been driven sharply lower by investors’ flight to safety in the face of economic uncertainty.