Companies in the Asia-Pacific region are slashing dividends at the fastest pace in more than a decade as the COVID-19 pandemic upends business plans and clouds the outlook for earnings.
About 23 percent of the MSCI Asia Pacific Index members have scrapped or reduced payouts this year, according to data through July 20 compiled by Bloomberg.
That is the most for such a period since 2009, when 41 percent of index companies took such steps in the aftermath of the global financial crisis.
Firms listed in China and Hong Kong make up a majority of those scrapping dividends, followed by corporates in Japan and Australia.
Having slammed company profits around the world, the uncertain duration and nature of the pandemic is increasing pressure on firms globally to preserve cash. Global payouts could contract by 15 percent to 35 percent this year — dropping to US$933 billion in the worst-case scenario, a study published in May by Janus Henderson Investors said.
“The lack of a mass market solution to alleviate the disruptions caused by the virus may lead to a continued impact on corporate performance and dividends alike,” IG Asia Pte Ltd analyst Pan Jingyi (潘婧怡) said.
North Asian markets such as China, South Korea and Taiwan would “continue to be favored” on the back of better management of the pandemic, she added.
While the stock index has surged 38 percent from its year-to-date low, a resurgence of the virus in places such as Australia and Hong Kong is threatening to delay the region’s economic recovery.
The consumer discretionary and materials sectors have seen the highest instances of scrapped payouts, with companies including Nissan Motor Co, Wanda Film Holding Co (萬達院線) and Japan Airlines Co having suspended dividends.
Still, the region has fared better than Europe, where about half of the Stoxx Europe 600 Index members either scrapped or reduced their payouts, while in the US, only 63 of the S&P 500 Index members announced such moves.
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