Rebound in asian dividends presents compelling investment opportunity, says hsbc's halbis

Asian are trading on yields that are higher than local involvement rates for the first time since July 2001 (lasting until Dec 2005).The electric current yield on the MSCI Pacific Ocean Free ex Japan index is about 2.86%, which comparison favourably to 's three-month deposit rate of 1.96%.

Ayaz Ebrahim, chief executive director officer for Halbis in Asia-Pacific, says a focus on companies with payout power arising from strong cashflow or improving capital direction has traditionally led to outperformance in volatile markets.  This is evidenced by past data which shows that during two bear marketplace phases since 1999 (Q4 of 1999 to Q3 of 2001 and Q1 of 2002 to Q1 of 2003), dividend focussed scheme were able to green goods positive returns.

Ebrahim says: "look ahead, growing will become more difficult to beginning. Therefore a focus on companies with comparatively high yields and de-leveraging reflected through strong dividend growth provides a healthy level of tax return and a shock absorber against further falls."

As well as providing an income stream which can make an important contribution to total returns, dividend producing companies are typically well-managed, mature companies with proven income watercourse, rather than newer speculative companies which nowadays higher risks.

Ebrahim adds: "We have traditionally associated dividend payouts with real net income growth or high quality. That is because dividend policy indicates managements' belief in their firm's hereafter prospects, improving corporate administration, and prudent capital management and spending.  Investors should pay a premium for companies that consistently and predictably reward minority shareholders."

Meanwhile, there is evidence that companies in Asia are becoming far more aware of the need to reward shareholders. According to research commissioned by Halbis, 20% of companies in 2007 were paying steadily rising dividends, compared to 15% in 2002, while 33% of companies delivered rising dividends with some down years, compared to 23% in 2002.  The number of companies paying no dividends fell from 9% to 7% over the period.

Halbis cites examples of dividend focused quality companies as Chunghwa Telecom in Taiwan (yielding 6.1%) and Singapore Airlines (yielding 4.1%). 

A strategy that focuses on high quality, high dividend companies is available via the HSBC GIF Asia-Pacific ex Japan Equity High Dividend fund. This fund, which is part of HSBC's flagship -based SICAV range and is available for sale in more than 35 countries, targets outperformance of the MSCI AC Asia-Pacific ex Japan index by 2-3% per annum on a rolling five-year basis.

According to figures provided by Morningstar, over the past year (to 31 March 2008) the US$127 million  fund has returned 16%, compared to the MSCI AC Asia Pacific ex Japan index of 9.73% and the Morningstar IM Equity Asia Pacific ex Japan sector average of 12.51%. Figures are quoted bid to bid in sterling terms.