Main Funds' Net Inflows in Six Industries Amid Market Shifts

Under the call of "enhancing quality, efficiency, and focusing on returns," listed securities firms have unprecedentedly competed to choose profit distribution in the middle of the year.

As of September 4, among the 43 listed securities firms, 24 have proposed specific mid-year profit distribution plans, with a total dividend payout of nearly 13 billion yuan. Among them, CITIC Securities plans to generously distribute a cash dividend of 3.557 billion yuan, leading the list. In addition, three listed securities firms, including CITIC Securities, Caitong Securities, and Great Wall Securities, have announced their intention to conduct an interim profit distribution for 2024 based on the company's profitability.

In stark contrast, from 2020 to 2023, the number of listed securities firms choosing to distribute profits in the middle of the year was 2, 4, 2, and 1, respectively.

Analysts point out that the high enthusiasm for industry dividends this year may mainly be due to policy guidance, optimizing capital structure, enhancing the attractiveness of listed companies, and improving governance levels. However, higher dividends from securities firms are not always better. In an increasingly competitive market, increasing dividends, while increasing short-term shareholder returns, can also impose constraints on the future cash flow and development capabilities of securities firms.

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24 securities firms distribute nearly 13 billion yuan in mid-year dividends

According to Wind data, among the 43 listed securities firms in the A-share market, 24 have currently announced their mid-year profit distribution plans for 2024, with a total cash dividend payout of up to 12.985 billion yuan.

Among them, the highest total dividend is still from the "big brother of the securities industry," CITIC Securities, which plans to use a cash dividend method, distributing 2.4 yuan (including tax) per 10 shares. The total cash dividend distributed is 3.557 billion yuan (including tax), accounting for 34.89% of the net profit in the first half of the year.

Following closely are Huatai Securities and Guotai Junan Securities, both distributing a cash dividend of 1.5 yuan (including tax) per 10 shares. The total cash dividend distributed is 1.354 billion yuan and 1.336 billion yuan, respectively, accounting for 25.5% and 26.63% of the net profit attributable to shareholders of the parent company in the first half of the year.

In addition, the mid-year dividend totals of China Galaxy, China Merchants Securities, GF Securities, and Orient Securities also exceed 500 million yuan. It is worth mentioning that although the net profits in the first half of the year for Hongta Securities and Haitong Securities are not as high as the aforementioned companies, their dividend actions are more generous. Among them, Hongta Securities plans to distribute a dividend of 222 million yuan, accounting for 49.35% of the current period's net profit; Haitong Securities plans to distribute a dividend of 390 million yuan, accounting for 40.88% of the current period's net profit.

Securities firms' profit distribution breaks records.In the past, it has been customary for listed securities firms to opt for profit distribution at the end of each year, with very few choosing to distribute dividends in the middle of the year.

Securities Times · Securities China reporters have tallied that from 2020 to 2023, the number of listed securities firms choosing to distribute profits in the middle of the year was only 2, 4, 2, and 1, respectively.

Data indicates that the number of listed securities firms planning to distribute dividends in the interim has surpassed the total of the previous three years, and the total amount of dividends has reached an all-time high. For some securities firms, the amount of dividends distributed in the middle of this year has also exceeded the combined total of the past two years.

Taking Founder Securities as an example, the firm introduced its first mid-term dividend plan in the first half of this year, with a total cash dividend payout not exceeding 395 million yuan (including tax), which exceeds the combined dividend amounts of the past two years. The dividend amounts for Founder Securities in 2022 and 2023 were 98.79 million yuan and 189 million yuan, respectively.

At the same time, among listed securities firms, including Western Securities, Zhongtai Securities, and First Capital, six listed securities firms with not-so-high net profits in the first half of the year still announced plans to distribute dividends of 0.06 to 0.1 yuan (including tax) per 10 shares, creating a strong "participation matters" atmosphere.

However, there are also firms like Guoxin Securities and Guoyuan Securities, which, despite achieving net profits of 3.139 billion yuan and 1 billion yuan in the first half of the year, respectively, have not announced any mid-year dividend plans.

Securities China reporters have noticed that, in addition to the 24 companies that have already released their dividend plans, there are also three listed securities firms—CITIC Construction Investment Securities, Caitong Securities, and Great Wall Securities—that have announced their intention to distribute profits in the middle of 2024, in line with the company's profitability. Among them, Great Wall Securities has clearly stated that this interim profit distribution is "to actively implement the regulatory requirements for promoting multiple dividends per year for listed companies and to truly enhance the sense of gain for investors."

Why are dividends surging in A-shares?

Securities China reporters have noticed that the performance of listed securities firms in the first half of this year was not a bumper harvest, and even many firms experienced a "slowdown" in performance.

Wind data shows that the combined operating income of 43 listed securities firms in the first half of 2024 was 235.023 billion yuan, a year-on-year decrease of 12.69%; net profit was 63.961 billion yuan, a year-on-year decrease of 21.92%. Among them, as many as 32 companies experienced a "double decline" in both revenue and net profit.Despite a decline in performance in the first half of the year, listed securities firms have set a record for mid-term dividends, with generous dividends for what reason?

"The high enthusiasm for dividends in the industry this year may mainly be due to policy orientation, optimization of capital structure, enhancement of the attractiveness of listed companies, and improvement of governance levels," said Chen Mengjie, a senior macro researcher at Debon Research Institute, to the reporter of Securities China.

Chen Mengjie analyzed that, on the one hand, the new "Nine National Articles" have strengthened the supervision of listed companies' dividends, increased the incentive for high-quality dividend companies, and proposed restrictions on major shareholders' reduction or risk warnings for listed companies that do not meet the dividend standards. The policy orientation is relatively clear, and future policies may continue to focus on shareholder returns, enhance investors' sense of gain, and reshape the market ecosystem. On the other hand, actively paying dividends to increase the dividend yield will enhance investor confidence, especially this year, which is a year of high dividend assets in the A-share market, helping to boost the company's valuation. In addition, consolidating market position and enhancing brand influence through dividends may also be a consideration for securities firms. Experience from mature markets also shows that an increase in dividends by listed companies is beneficial for attracting long-term funds with lower risk preferences, such as pension funds, social security funds, and insurance funds.

Taking the popular dividend strategy in the first half of the year as an example, Meng Lei, a China equity strategist at UBS Securities, pointed out that this year's market style is mainly dominated by ETFs and insurance funds. In the interest rate downcycle, the high cost of liabilities forces insurance funds to adopt a credit sinking strategy and strengthen their allocation to stocks. The high dividend sector in the stock market has thus become the most favored target for long-term funds represented by insurance funds.

However, Chen Mengjie also believes that the higher the dividends of securities firms, the better. In the increasingly competitive market, increasing dividends will not only increase short-term shareholder returns but also constrain the future cash flow and development capabilities of securities firms.