A-shares not as cheap as valuations suggest

After yet another big tumble in the A-share market, Chinese stocks look like a good trade for 2013. But appearances can be deceptive.

“Share price valuations may be cheap but their dividend payout is relatively low,” said Edward Huang, strategist at Haitong Securities International. “A low dividend payout ratio of around 30% doesn’t make the low valuation attractive.”

China’s equity markets have long favoured issuers over investors, with little transparency and a poor track record of dividend payments. Many of the more than 2,000 A-share companies do not pay dividends on a regular basis, or have never shared earnings with investors at all.

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