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Tuchong Creative/Photo provided by Zhao Mengqiao/Table created

Securities Times reporter Zhao Mengqiao

Recently, against the backdrop of many bank stocks hitting record highs, a dividend-themed fund under a public offering in South China announced that it had hit the liquidation line due to its small size for several consecutive days. This is rare in the context of the "dividend fever" this year, and also reflects that after the sector fluctuated and fell, the market has a different attitude towards dividend-themed investment. Whether it is the slowdown in the growth of ETF shares or even net redemption, or the postponement of fundraising for some products at the issuance end, it means that some funds have voted with their feet with a cautious attitude.

In addition, in the second quarter reports released recently, fund managers also had different views on the dividend sector. Some fund managers believe that the dividend sector can continue its strong performance in the first half of the year; but others believe that from the perspective of investment cost-effectiveness, the attractiveness of the dividend sector has declined, and at this point in time, the valuations of some growth sector companies are lower than those of dividend companies.

Dividend-themed funds rarely liquidate

Recently, GF CSI Dividend Exchange Traded Open-End Index Securities Investment Fund (hereinafter referred to as "Dividend 100 ETF") disclosed an announcement that the net asset value of the fund was less than 50 million yuan for 40 consecutive working days, triggering the termination of the "Fund Contract".

Data shows that the fund tracks the CSI Dividend Index, and its major holdings include China Shenhua, Shaanxi Coal, Heilan Home, Tangshan Port, etc. In the second quarter, the net value of Dividend 100 ETF increased by 1.69%. On July 18, the fund disclosed its second quarter report, showing that the profit in the second quarter was 3.7214 million yuan, and the net asset value of the fund at the end of the period was 42.4491 million yuan, but the net amount of subscription and redemption of the fund in a single quarter was 178 million shares.

It is worth noting that the above phenomenon is not common. Although the pace of fund liquidation has accelerated recently, the liquidation of dividend themes within the year is unique. This also reflects that while the recent dividend market is volatile, the market has differences on this sector.

The CSI Dividend Index rose first and then fell this year, with a rise of more than 16% at one point, but then it fell back, and the rise was less than 5% as of July 19. During this period, related dividend-themed funds once became the target of capital pursuit. According to statistics, the shares of Huatai-PineBridge Dividend Low Volatility ETF increased by 5.7 billion shares this year, and Tianhong CSI Dividend Low Volatility 100 ETF and E Fund CSI Dividend ETF increased by 3.084 billion shares and 1.787 billion shares respectively.

However, since the second quarter, the growth rate of some ETF fund shares has slowed down, and some have even suffered net redemptions. For example, the shares of Taikang CSI Dividend Low Volatility ETF decreased by 363 million shares, ICBC Shenzhen Stock Exchange Dividend ETF and GF CSI Dividend ETF decreased by 339 million shares and 180 million shares respectively; during this period, the shares of the top ETFs also fluctuated, such as the net redemption of about 75 million shares of Huatai-PineBridge Dividend ETF, which ranked first, and the net redemption of 50 million shares of Invesco Great Wall CSI Dividend Low Volatility 100 ETF.

In addition, there has been an uneven phenomenon in the issuance of funds recently. On July 9, the Fuguo CSI Central Enterprise Dividend ETF announced that it would close its fund-raising early: the previously planned closing date of July 18 was brought forward to July 11; similarly, on July 6, the China Europe Dividend Selection also announced that it would advance its fund-raising period by 7 days.

However, there are also cases of delayed fundraising, such as the announcement of the Agricultural Bank of China Dividend Selection Fund, which was issued on July 2 and had an original fundraising period of only 14 days. After the adjustment, the fundraising period of the fund was extended to 28 days.

It is worth mentioning that there are currently a total of 8 products with the word "dividend" in their names, including Huaan CSI Dividend Low Volatility Index, CSOP Dividend Quantitative Stock Selection, and Morgan Dividend Selection, being issued. Among them, Invesco Great Wall CSI Hong Kong Stock Connect Dividend Low Volatility ETF was issued in May and Galaxy CSI Dividend Low Volatility 100 Index was issued in early June, but both have not yet completed fundraising.

What is the reason for the pullback?

Looking back at the trend this year, dividend assets have continued to rise against the trend, attracting more funds to enter the market, causing the trading congestion of the sector to increase and the dividend rate to decline rapidly, thus exacerbating the volatility of the short-term sector market. Some institutions analyzed that after the recent correction, the transaction volume of the dividend sector continued to decline, indicating that short-term funds began to retreat and trading congestion decreased. At the same time, the dividend rate of the dividend sector began to stabilize and rise again.

Regarding the recent pullback, Morgan Fund believes that the dividend sector has a "calendar effect". Generally speaking, listed companies pay dividends once a year and disclose dividend plans when releasing annual reports, but the dividend plans need to be approved by the shareholders' meeting. Because the annual report needs to be disclosed before the end of April every year, but the disclosure time of different companies is different. For example, some companies disclose in January and may receive dividends in March, but if the annual report is disclosed at the end of April, some may not receive dividends until June after the shareholders' meeting approves it.

"Therefore, dividends of A-share listed companies have obvious seasonality. During this period, cash dividends of most listed companies will be implemented, which may subsequently trigger some funds to take profits, thereby bringing downward pressure on related asset prices. For example, based on the monthly performance of the CSI Dividend Index in the past 15 natural years, the positive return ratio of the CSI Dividend Index from April to June was relatively low." Morgan Funds said.

Morgan Fund believes that after the correction, the allocation value of dividend assets is still significant. In the long run, asset prices fluctuate around value. As of July 12, the 10-year Treasury bond yield was 2.26%, while the dividend rate of the CSI Dividend Index (in the past 12 months) was 5.86% during the same period. In contrast, the dividend rate of the dividend index is outstanding and the allocation value is relatively high.

Disagreements emerge

Liu Yuanhai of Soochow Fund, which had a heavy position in the TMT industry last year, recently clearly stated his optimism about the dividend sector. In the second quarter report, he said: "From the perspective of industry performance, in the second quarter, dividend assets represented by banks, utilities and coal, as well as AI computing power and AI hardware represented by optical modules performed relatively strongly, that is, dividend assets and technology performed relatively well. We are relatively optimistic about the A-share market in the second half of 2024, and believe that there may be structural investment opportunities, with a focus on investment opportunities in technology and dividend assets."

Bocom Schroder Fund believes that under multiple uncertain factors, coupled with the difficulty in reversing the short-term low interest rate environment, the current market's risk appetite is still relatively low. High-dividend companies often have relatively stable profitability and dividend capabilities, and their valuations are relatively low. For investment returns, this is a "relatively stable" signal and is expected to continue to attract market attention.

However, after the pullback, some fund managers expressed their cautious attitude towards the dividend sector in the second quarter report. Tan Li, fund manager of Harvest Fund, said: "In the second quarter, we moderately reduced holdings of some dividend assets, mainly upstream resource assets, which are also the assets with the highest growth in the past two years." She believes that after the continuous rise of dividend assets, the valuation has become reasonable. To continue to rise, the expectation of rising commodity prices needs to be further strengthened. From the perspective of investment cost-effectiveness, the attractiveness has declined.

Yu Haocheng, fund manager of Hongde Fund, also believes that compared with dividend assets, some current growth assets have higher potential returns in the future, because the valuations of some small and medium-sized companies that still have growth potential are already lower than dividend companies. Therefore, in terms of industry allocation, the investment portfolio he manages has begun to reduce holdings of dividend assets in the second quarter.