Bank of Communications Co Ltd (03328) has started a good momentum for mainland banking shares— it managed to maintain a one-per-cent growth despite observers’ poor outlook of its performance. Another important information is that its dividend remains unchanged. As of today, almost all mainland banking shares have become high-dividend shares.

But quite a number of naysayers think the contrary, and they are pleading investors not to be fooled, as they opined that buying mainland banking shares would definitely mean losing one’s capital. The reasoning behind that is that mainland banks need to deal with enormous amount of bad debts, and investors might be earning dividend but losing out when the stock prices decrease.

Low Price High Dividend Rare in History

In the past few months, I have been among the very few analysts who suggested investors to buy HSBC Holdings (0005) and mainland banking shares to earn high dividends. It surely was true that stock prices of HSBC Holdings and mainland banking shares have plummeted. However, thanks to their stock price plunge, they now became high-dividend shares.

Before this, those were shares of high prices and low dividend – which were of low investment value. I then waited patiently, and only started singing praises when HSBC Holdings and mainland banking shares are offering 0.08 per share. In which year, by the way, you ever witnessed HSBC Holdings giving out a dividend as high as 0.08 per share?

Invest blue-chip stocks at a good price

As Bank of Communications released its performance report, other mainland banking shares would follow suit. If they are to maintain the same level of dividend per share, the worst situation has perhaps subsided. In the event of the share prices shooting up, however, the dividend level would perhaps be lowered, and would no longer maintain at 0.08 per share.

Janet L.Yellen, Chair of Federal Reserve, just strongly hinted recently in her public speech that future rate hikes would be slower than expected, and greater caution would be exercised in lifting interest rates. Within a short period of time, U.S. stocks reported an uptrend, and so did Hong Kong stocks. This surely is good news.

What concerns the market most is perhaps the longevity of U.S. stock markets – the lifespan of the “old bull” which has been rallying up since March 2009. This makes it a seven-year uptrend until now. Seven good years of bullish market trend, from some investors’ point of view, is something too good to be true.

If Yellen is able to push Dow Jones to reach another new height in 2016, she would become a legendary figure creating history.

As compared to U.S. stocks, Hong Kong stocks are rather low-priced. I am sure that international hot money which flew out of Hong Kong will return soon. We should therefore be as optimistic as possible. As of now, share prices of Hang Seng Index Constituents have registered a great loss, which means that investors can perhaps go bargain hunting.

Meanwhile, Dr Chan will be sharing more insights about his macro outlook of the economy and what you can do during this time of uncertainty at our upcoming Shares Investment Conference 1H2016. Click here to find out more.

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