Alexa An $86B dividend payout threatens to drive the yuan lower
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An $86B dividend payout threatens to drive the yuan lower

Banking And Finance

An $86B dividend payout threatens to drive the yuan lower

Having dropped by most on record in offshore trade last month, China’s Yuan is now facing the threat of selling pressure from the country’s companies.

According to Bloomberg’s data, Chinese firms are poised to increase dividend payments in the coming months, with over 500 Hong Kong-listed companies to pay around HK$677 billion ($86.2 billion) this year. This year’s June-August peak is set to be 16% larger in terms of payment size than the payment for 2021’s same period.

As strict COVID lockdown measures wreak havoc on China’s economy and capital outflow concerns mount, a potential wave of yuan selling by firms to pay dividends in foreign currency could increase downward pressure. In its most significant monthly decline on record, the offshore yuan fell over 4% in April as the dollar surged.

Tech giant Tencent Holdings Ltd. and State-owned banks led by China Construction Bank Corp. are among the ten most generous dividend issuers, making up nearly 49% of Chinese H-share payments scheduled to be paid this year. Most of these companies have increased dividend payouts from last year.

On Friday, the offshore yuan reserves declined, weakening past the 6.7 per dollar level to an 18-month low. The Hong Kong dollar could be one of the beneficiaries of the payout demand.

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