As we step into 2025, many investors are plotting their financial paths and considering various asset classes to allocate their resources. The predominant sentiments indicate diverse opinions — some argue for the potential of the A500 index, others assert that 2025 heralds a golden age for technology giants, while some anticipate a resurgence in consumer spending. However, amidst these discussions, one category of assets remains prominently suggested by seasoned investors: high-dividend assets, commonly recognized as dividend stocks.

In the previous year, skepticism surrounded the prospects of dividend assets, with many declaring that their prices had surged too high and could plateau in future growth. Contrary to these opinions, I advocate a different perspective, underpinned by current economic indicators and global financial dynamics that may suggest a robust future for high-dividend assets.

(1) High-Dividend Assets Maintain Strong Growth Potential

Could the high-dividend assets have a promising future? Without a doubt, and here's why:

First, government policies are increasingly favorable. Recent changes, including the suggestions from China's new policies to encourage significant increases in corporate dividends, signal a strong governmental backing for high-dividend equities. The Central Government's directives, particularly those aimed at central enterprises to bolster cash divestments through more frequent and substantial dividends, reinforce this supportive environment.

Secondly, the value proposition of high-dividend stocks is attractive. A comparative analysis of dividend yields against government bond rates illustrates another layer of rationale; when dividend yields surpass bond yields, they signify an appealing investment stance. This phenomenon is reflected in Japan's stock market from the 1990s, where high-dividend stocks demonstrated substantial growth amid declining government bond yields.

Over a near thirty-year stretch following 1990, Japan's 10-year government bond yields showed a consistent decline, while the TOPIX index's dividend yield exhibited an upward trend. This resulted in Japanese dividend assets outperforming the broader market. Statistics reveal that the China Dividend Index recorded a dividend yield of 5.15% as of January 3, 2025 — a compelling figure, considering the trajectory of bond yields.

Moreover, the current dynamics of China's economy emphasize a weak recovery, suggesting that the likelihood of a sudden rebound in bond rates seems low. Thus, the investment value in high-dividend assets is poised to remain strong in the long run.

(2) The Optimal Approach to Allocating High-Dividend Assets

Currently, the favored approach among investors is to utilize index funds that focus on dividend-related sectors. This broadens access and simplifies the investment process in high-dividend equities.

Yet, this strategy naturally raises the question: Which markets offer the best indices for investment—mainland China or Hong Kong?

A comparative analysis of the major dividend indices from both markets leads to the S&P Hong Kong Stock Connect Low Volatility Dividend Index emerging as the superior choice. To provide context on this index: it selects stocks primarily based on two pivotal factors—low volatility and high dividend yields—culminating in a selection of the top 50 stocks that embody these characteristics.

The S&P Hong Kong Stock Connect Low Volatility Dividend Index Outshines Its Peers!

As of December 31, the S&P Hong Kong Stock Connect Low Volatility Dividend Index boasted an impressive dividend yield of 7.41%, coupled with semi-annual and annualized volatility rates of 18.51% and 18.24%, respectively. These figures indicate the index's superior performance compared to other notable dividend strategies in both A-shares and Hong Kong markets.

These outstanding metrics consistently depict the S&P Hong Kong Stock Connect Low Volatility Dividend Index as an attractive option, showcasing superior dividend returns and lower volatility compared to its contemporaries. Such an index is particularly appealing during times of market instability, promising steadiness and rewarding returns.

Valuations Reflect Stronger Investment Viability

Apart from high yields and reduced volatility, the underlining valuation characteristics of Hong Kong equities serve as another compelling reason for investors. Recent data as of January 3 indicate that the Hang Seng China Enterprises Premium is at 143.13, with a price-to-earnings (P/E) ratio of just 7.98—a stark contrast to the enhanced value position these assets hold compared to their mainland counterparts.

Such metrics reveal that Hong Kong assets stand at a relative discount to those available in China, providing a more attractive value proposition for discerning investors. The valuation metrics denote that as of December 31, the S&P Hong Kong Stock Connect Low Volatility Dividend Index experienced a P/E of 7.77 and a price-to-book (P/B) ratio of 0.45, signaling a compelling opportunity for investment.

Currently, there's only one exchange-traded fund (ETF) directly tracking this index, namely the Morgan S&P Hong Kong Stock Connect Low Volatility Dividend ETF (513630). While its investment merits are significant, potential investors should consider critical features surrounding this index fund.

The first notable aspect is the T+0 trading mechanism, allowing investors to make multiple trades within a single day. This flexibility enhances opportunities to harness short-term market fluctuations and adjust strategies quickly based on market conditions.

Secondly, this ETF maintains a significant asset volume, enhancing its liquidity. Recent data reveals that as of January 8, the ETF's scale has reached 6.421 billion yuan, illustrating robust trading activity, with average daily trading values surpassing 100 million yuan over the past few months.

Lastly, the growing interest from institutional investors, particularly in insurance funds, underscores the attractiveness of this ETF. Data from 2024 suggests that seven out of the top ten shareholders in this ETF are insurance firms, reflecting broader trends within institutional investment, heavily favoring high-dividend assets for their long-term value.

It is noteworthy that Morgan Asset Management has developed a comprehensive "Dividend Toolbox” that caters to investors engaged in various segments, including Hong Kong dividend assets, mainland A-share dividends, and high-yield assets across the Asia-Pacific, providing an impressive range of diversified dividend investment strategies.

As 2025 unfolds, investors looking to optimize their portfolios may find unique value in targeting high-dividend, low-volatility assets, such as the Morgan S&P Hong Kong Stock Connect Low Volatility Dividend ETF (513630), a resourceful tool amid a diverse investment climate.