Complete the puzzle of earning interest, temporarily replacing the fund "HK Energy ETF".
An article shared by a user went viral with a popular image (Figure 1) titled "Dividend Strategy in the Era of 1% Low Interest Rates." I've seen many people discussing the investment targets related to these assets. However, I recommend being aware of the risks first. The author also emphasized "Counterintuitive Insights in Investing."
But I’d like to delve deeper into a specific detail. I noticed that one major asset class in the image currently lacks an optimal corresponding ETF target—the "Energy Stock Index" mentioned in the chart. Energy stocks indeed offer relatively high dividend yields, with top energy stock indices yielding around 4-5%, and Hong Kong stocks reaching 7-8%.
Although there are energy ETFs in the market, I found that the current energy ETF tracks the CSI A-share Energy Index, which includes companies like the "Three Barrels of Oil" (PetroChina, Sinopec, CNOOC) and China Shenhua. However, these companies are also listed in Hong Kong, where their dividend yields are higher, even after accounting for dividend taxes.
Yet, there is no so-called "Hong Kong Energy ETF" in the market. This might be due to insufficient targets, as index creation typically needs at least 30 stocks. Under these circumstances, are there funds that can indirectly invest in this sector? Surprisingly, yes!
I screened several major Hong Kong-listed energy stocks and found two highly suitable targets (Figure 2).
First is the Guoxin Hong Kong Stock Connect Central SOE Dividend Index. This index includes the "Three Barrels of Oil" and China Shenhua (HK), accounting for nearly 40% (Figure 2). From an industry perspective, the energy sector makes up 40% (Figure 3). Additionally, someone recently asked on XING if there’s a high-dividend index excluding banks—this index fits perfectly, as it notably excludes the financial sector (Figure 3). Currently, Invesco, GF Fund, and Southern Fund track this index, with Invesco’s being the largest, listed as "HK Central SOE Dividend 50ETF" (520990).
Another ETF that includes all five stocks I screened is ChinaAMC’s Hang Seng China Mainland Enterprises High Dividend Yield ETF (159726). The five stocks account for about 15% of this ETF, with the energy sector making up 18% (Figure 7). Currently, only ChinaAMC tracks this index, which is more conventional, including sectors like banking and utilities.
(Not investment advice)
$ChinaAMC Hang Seng Mainland Enterprises High Dividend Yield ETF(159726.SZ) $Invesco Great Wall CSI China Reform Hong Kong Connect Central-SOEs High Dividend Yield ETF(520990.SH) $GF Fund CSI China Reform Hong Kong Connect Central-SOEs High Dividend Yield ETF(520900.SH) $China Southern CSI China Reform Hong Kong Connect Central-SOEs High Dividend Yield ETF(520660.SH) $BOS CSOE HIDV(03437.HK)
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