The report from the investment firm sets out prospects and trends for public and private markets in Asia.

Listed companies in the Asia-Pacific region are increasingly focusing on raising shareholder returns, and more firms are hiking dividend payouts and repurchasing shares, Cambridge Associates, an investment house, says in a new report. 

“This trend comes amid a market rotation toward high dividend–yielding companies, as investors seek stable income returns, given rising uncertainty and overvaluations in certain segments of the market,” the firm said in its Asia Insights report. 

At the end of May this year, Reuters reported that Chinese-listed companies are rushing to buy back shares and lift dividends as they respond to regulators' calls that echo reform efforts in Japan and South Korea. China-listed firms announced record cash dividends totaling RMB2.2 trillion ($300 billion) for 2023 despite a fall in combined profit, official data shows. Over 100 listed companies returned money to investors for the first time, the report said. 

In January, the Tokyo Stock Exchange issued a list of firms that have disclosed plans to increase their capital efficiency, a move aimed at raising Japanese valuations and attracting overseas investors. The market and Japanese authorities have pushed to improve governance at listed companies.

The CA report said such measures had proven their worth.

“In Japan, driven by regulatory changes and increased shareholder activism, has led this shift. Reforms introduced by the Tokyo Stock Exchange in January 2023 have put pressure on Japanese companies that trade below book value to take action to narrow their valuation discount, largely through increasing dividends and conducting shares repurchases,” Wilson Chen, managing director, public equities at CA, said in the report. “Such measures have helped to boost Japanese companies’ return-on-equity and supported upward stock price revaluations, creating positive tailwinds for the market. The small-cap segment could see greater benefits from reforms, given wider valuation discounts.”

Chen argued that in South Korea and China, similar efforts are now being observed. 

“South Korea’s ‘Corporate Value-up Program’ seeks to improve capital efficiency and equity valuations of firms through the voluntary disclosure of plans to enhance shareholder value. In China, more firms are responding to regulatory calls to increase dividends and share buybacks and others are re-listing on more favorable exchanges or spinning off units to unlock value and boost investor confidence,” Chen said. 

Source: Cambridge Associates

As this publication has noted before, moves by Japanese firms to unlock large surpluses of cash on their balance sheets have been a factor behind rising stocks in the country, although returns to non-Japanese investors have been blunted by the weakening yen rate versus the dollar.

Private credit
In the private credit space, CA said capital has “rotated away” from China and toward developed markets such as Australia and South Korea, while India also remains a destination for capital. 

“Broadly, the Asia private credit market remains underpenetrated and is less crowded but poised for growth, presenting an interesting opportunity for investors to gain a diversified exposure,” the report said. 

Turning to India, the report noted that venture capital is starting to “look more attractive today given a favorable macroeconomic backdrop, an improving startup and manager landscapes, and a broadening of exit channels. In contrast to India public markets, which have run up and appear frothy, India VC activity has cooled alongside global VC markets.” 

“As a result, India VC valuations are moderating, making now a more opportune time for investors considering access,” it said. 

Within Chinese private investments as a whole, the report said fundraising activity “remains frozen” because there are uncertainties about geopolitical tensions and pending US investment restrictions. 

“However, deal-level opportunities still exist in certain segments of the market, particularly for buyouts where the current macro environment is conducive for market consolidation and control opportunities,” it added.