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New indices to launch in July

2013-06-06 11:16 Global Times     Web Editor: qindexing comment

The Shanghai Stock Exchange (SSE) and China Securities Index Co (CSI) will launch a series of new equity indices on July 2 designed to serve as benchmarks for investors targeting high-yield stocks with strong dividend growth potential, according to information posted Wednesday on their websites.

Two of the benchmarks, the SSE Dividend Potential Index and the CSI Dividend Potential Index, will be composed of the top 50 shares offering the most sustainable and consistent dividend payouts trading on the SSE and the broader A-share market respectively, the two institutions announced.

For investors, these indices are likely to underpin an array of new instruments, such as index futures and exchange traded funds, Zhang Xi, an analyst from Guotai Junan Securities, told the Global Times. "Securities regulators and market authorities are trying to open more new investment channels in order to keep market liquidity topped off," Zhang added.

"Of course, these indices will also help guide investors looking for positions in companies with high dividend-payment abilities," Zhang went on to remark.

As the SSE and CSI explained, their upcoming indices will only include shares which have continuously paid out cash dividends for at least the past three years, with last year's dividends equaling no less than 30 percent of profits attributable to shareholders. Eligible shares must also rank within the top 80 percent of their respective market range in terms of average daily market cap and trading value.

According to CSI, the weighted average dividend yield of components on the CSI Dividend Potential Index stands at 3.44 percent, well above the market average of 2.85 percent, while the average dividend per share was roughly double the statistical mean within the broader A-share market.

Faced with mounting regulatory pressure, several of China's public firms recently put forward plans to dispense historic dividend payouts. In their 2012 earnings reports, A-share companies declared their intentions to hand out a combined 630 billion yuan ($102.82 billion) in dividend payments over the coming year, up 13.46 percent compared with 2011, the SSE wrote.

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