Analysis: Dividends to the fore as investment theme in Asia

Wed Dec 14, 2011 12:41am EST
 
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By Vikram Subhedar and Nishant Kumar

HONG KONG (Reuters) - Investing for income rather than growth in Asia is likely to pay dividends for investors nursing wounds after a rough 2011 and staring at an uncertain outlook next year.

A focus on dividend payouts by Asian corporates, considered by many as a somewhat defensive strategy, runs contrary to the popular notion that investing in the region is all about chasing earnings-driven momentum.

But with economies across Asia slowing, forecasts for corporate profits being cut as headwinds from Europe persist and investor appetite for yields still growing, market watchers say a defensive stance on equities might be on the money.

"In Asia, not many people look at dividends. But going forward, because of the rangebound market, dividend yield will be the main return for a while," said Li Cong, who helps manage more than $5 billion as chief investment officer of Asia-Pacific at Mirae Asset Global Investments (HK).

In a move that suggests this could be a global theme, Goldman Sachs on Tuesday struck a deal to acquire a mutual fund specializing in dividend-paying stocks, citing investor demand for income-generating strategies to sustain them in turbulent, no-growth markets.

With the acquisition, Goldman will now offer its first dividend-growth stock fund, an indication of growing customer demand for safety and income over risk.

DIVIDEND FUNDS SEE INFLOWS

This year in Asia, money managers such as JPMorgan Asset Management, UBS Global Asset Management and Invesco have launched dividend-focused funds in an attempt to tempt investors into putting money to work in stocks that offer the relative safety of a steady yield even in volatile markets.   Continued...