It is fair to say that attitudes to the Chinese market have fluctuated in recent years. Lower growth data and the impact of the Covid-19 pandemic dampened share prices in the early 2020s. Then, the announcement of surprise economic support from the government prompted an upswing last year.
The revelation in early 2025 provided by Deepseek that Chinese companies are quietly innovating behind the scenes also gave global investors pause. And that all came before President Trump’s tariffs.
Keeping income in mind
This noise could easily distract investors in the region. However, the nature of investing for income is that it is important to be as aware of the source of tomorrow’s income streams as today’s. A recent trip to Hong Kong highlighted this dynamic; I met with both high yielding companies with little exposure to China and some of the higher growth names in China.
Given the macroeconomic fluctuations, in my view the first category provides relatively stable income streams for the trust. The latter group offers the potential for future growth, the cashflows that comes with and the income stream those flows can eventually produce.
High yielders in Hong Kong
A company in the first category that I met recently is First Pacific. The business is a holdings company. Its underlying brands operate in segments varying from infrastructure to telecommunications to consumer foods. These are visible in a multiple Asian markets, with the Philippines making up a large proportion.
The stock price is very cheap relative to its earnings – we think because it is relatively unknown – and it yields a healthy 5.4%. This is due to rapid profit growth since 2019.
Another example of a higher yielder is Hong Kong Telecom. The company is very much the legacy operator of communications services in Hong Kong. It is in a position of strength, given that fixed line services are still highly prized in the territory. As such, its revenues are resilient, supporting its current income payouts – although there is some potential for growth in its pay TV services.
Capital growth in China?
If talk turns to innovative growth in global markets, talk often turns to Silicon Valley. Yet, Chinese companies have been quietly innovating – and penetrating outside of China – over the last few years.
Trip.com is a Chinese travel operator that goes from strength to strength. The company is still benefitting from a return to normal for Chinese outbound and inbound tourism post Covid-19. It is investing in customer acquisition in Asia and is seeing growth from its target markets. From a corporate point of view, it has hinted that it will introduce a regular dividend policy. This puts it on the pathway from growth to yield for HFEL and its shareholders.
Glossary
Dividend
A variable discretionary payment made by a company to its shareholders.
Macroeconomics/Microeconomics
Macroeconomics is the branch of economics that considers large-scale factors related to the economy, such as inflation, unemployment or productivity. Microeconomics is the study of economics at a much smaller scale, in terms of the behaviour of individuals or companies.
Yield
The level of income on a security over a set period, typically expressed as a percentage rate. For equities, a common measure is the dividend yield, which divides recent dividend payments for each share by the share price. For a bond, this is calculated as the coupon payment divided by the current bond price.
