China’s ambitious campaign to revive its flagging stock market has made the yuan an unintended casualty, with record dividend payouts leading to outflows.
Interim dividends paid by Hong Kong-listed Chinese firms are set to reach $12.9 billion between January and March, a record level for the first quarter, according to Bloomberg-compiled data. That comes as fourth quarter levels have already topped $16.2 billion, the most ever for the period and up 47% compared with a year ago.
The dividend bonanza is adding pressure on the Chinese yuan already weighed by a resurgent dollar and the prospect of growing US-China tensions. The firms mostly pay dividends in Hong Kong dollars but earn the majority of their revenues in the yuan, which requires conversion.
The looming outflows will test Beijing’s ability to achieve short-term market stability without compromising longer term goals in the world’s No 2 economy. That’s especially important as policymakers also ramp up efforts to defend the currency currently hovering near one-year lows.
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