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August 2017

Investment insights

More growth to come from Asia

Asia’s emergence over the last decade has clearly had a major impact on the global investment landscape. An interesting - but perhaps underappreciated - development has been the change in the investor base of Asian companies. Not only are a greater number of international investors now recognising the region’s favourable long-term prospects, but rising wealth levels across Asia means more individuals are also investing their own money in equity markets.
 
The net result of this has been a significant improvement in corporate governance standards as investors demand companies move to higher international standards, with greater transparency and better capital allocation. In short, we are seeing more emphasis on minority shareholders.
 
Paying a dividend is a prime example of this. Over the last 15 years, Asia has shown the strongest dividend growth globally and today offers very attractive headline dividend yields. In fact, the dividend yield for the overall market is higher than the US and only marginally below Europe.
 
We would argue that the outlook for further dividend growth in Asia is equally positive. Corporate balance sheets are generally in good health after years of deleveraging and payout ratios are still low at around 35%. This is materially lower than the equivalent levels in the Europe, US and Japan and provides ample room to increase from here.
 
 
An example of a company improving shareholder returns through dividends is Taiwan Semiconductor Manufacturing Company (TSMC). The company is the largest semiconductor foundry business globally and has recently introduced a progressive dividend policy instead of a stable dividend in previous years.
 
In June, TSMC paid out over US$5bn to shareholders making it one of the largest dividend payers globally. It now pays out more than 50% of earnings to shareholders and provides an attractive headline yield with significant prospects to grow the dividend stream to investors.
 
Encouragingly we are also seeing governments across the region implement reforms to encourage companies to return more cash to shareholders via higher dividends, particularly among Chinese state-owned enterprises.
 
Elsewhere, we see positive signals around capital allocation in Korea, where the authorities have pushed through reforms to make it more tax efficient for companies to return cash to shareholders than to leave it sitting idle on balance sheets.
 
This is particularly evident in Samsung Electronics - one of the largest and highest profile companies in Korea - which earlier this year boosted total shareholder return through a combination of dividends and share buybacks. Over time, we expect more companies to follow this lead with dividends set to become an increasingly important driver of returns across regional equity markets.
 
Interested in investing in Asia? The Fidelity Asia Fund has a strong ten-year track record backed by more than 40 years’ experience investing in Asia. Click here to view fund page. 
 
 
 
 

This document is issued by FIL Responsible Entity (Australia) Limited ABN 33 148 059 009, AFSL No. 409340 (“Fidelity Australia”). Fidelity Australia is a member of the FIL Limited group of companies commonly known as Fidelity International.

This document is intended for use by advisers and wholesale investors. Retail investors should not rely on any information in this document without first seeking advice from their financial adviser. You should consider these matters before acting on the information. You should also consider the relevant Product Disclosure Statements (“PDS”) for any Fidelity Australia product mentioned in this document before making any decision about whether to acquire the product. The PDS can be obtained by contacting Fidelity Australia on 1800 119 270 or by downloading it from our website at www.fidelity.com.au. Information stated herein about specific securities is subject to change. Any reference to specific securities should not be taken as a recommendation to buy, sell or hold these securities and may not represent actual holdings in the fund at the time of this viewing. While the information contained in this document has been prepared with reasonable care, no responsibility or liability is accepted for any errors or omissions or misstatements however caused. This document is intended as general information only. The document may not be reproduced or transmitted without prior written permission of Fidelity Australia. The issuer of Fidelity’s managed investment schemes is FIL Responsible Entity (Australia) Limited ABN 33 148 059 009. Reference to ($) are in Australian dollars unless stated otherwise.

©2017 FIL Responsible Entity (Australia) Limited. Fidelity, Fidelity International and the Fidelity International logo and F symbol are trademarks of FIL Limited.

 

 

This website is intended to provide general information only and has been prepared without taking into account your objectives, financial situation or needs. You should consider these matters before acting on the information and consider the relevant Product Disclosure Statement for any product named on this website before making an investment decision.

© 2017 FIL Responsible Entity (Australia) Limited ABN 33 148 059 009, AFSL No. 409340.
Fidelity, Fidelity International and the Fidelity International logo and F symbol are trademarks of FIL limited.

This document is issued by FIL Responsible Entity (Australia) Limited ABN 33 148 059 009, AFSL No. 409340 ("Fidelity Australia"). Fidelity Australia is a member of the FIL Limited group of companies commonly known as Fidelity International. Prior to making an investment decision retail investors should seek advice from their financial adviser. Please remember past performance is not a guide to the future. Investors should also obtain and consider the Product Disclosure Statements ("PDS") for the fund mentioned in this document. The PDS is available on www.fidelity.com.au or can be obtained by contacting Fidelity Australia on 1800 119 270. This document has been prepared without taking into account your objectives, financial situation or needs. You should consider such matters before acting on the information contained in this document. This document may include general commentary on market activity, industry or sector trends or other broad based economic or political conditions which should not be construed as investment advice. Information stated herein about specific securities is subject to change. Any reference to specific securities should not be construed as a recommendation to buy, sell or hold these securities. While the information contained in this document has been prepared with reasonable care no responsibility or liability is accepted for any errors or omissions or misstatements however caused. The document may not be reproduced or transmitted without prior written permission of Fidelity Australia. The issuer of Fidelity funds is FIL Responsible Entity (Australia) Limited ABN 33 148 059 009. References to ($) are in Australian dollars unless stated otherwise. © 2017 FIL Responsible Entity (Australia) Limited. Fidelity, Fidelity International, and the Fidelity International logo and F symbol are trademarks of FIL Limited.