Chinese companies could unlock a further 15 per cent in equity valuation upside by stepping up share buy-backs and dividend payouts, as Beijing seeks to encourage listed firms to return more cash to investors, according to Goldman Sachs.
The US investment bank said in a report on Wednesday that an increase in corporate payout ratios and share repurchases, in line with policymakers’ efforts to improve shareholder returns, could lift valuations of the MSCI China Index by about 15 per cent from current levels through improved returns on equity and cash distributions to shareholders.
Goldman said Chinese companies had historically favoured issuing new shares over buying them back, with equity issuance outpacing repurchases for most of the past two decades.