Q&A Series: Lion-China Merchants CSI Dividend Index ETF: Harvesting China’s Dividend Potential

China’s equity market is home to numerous large-cap companies with some having stable dividend distribution policies. Many of these firms are leaders in sectors such as financials, energy, and utilities, benefiting from China’s massive consumer base and continued infrastructure development.

Launched by Lion Global Investors in collaboration with China Merchants Fund Management, the Lion-China Merchants CSI Dividend Index ETF (SGX: INC and ICH) aims to replicate the performance of the underlying CSI Dividend Index as closely as possible, before expenses.

Good news for Singapore investors—you no longer need to invest in an overseas ETF to gain exposure to the CSI Dividend Index. Through the SGX-listed Lion-China Merchants CSI Dividend Index ETF, Singapore investors can now conveniently access China’s high dividend-paying stocks. This is the first CSI Dividend Index ETF available outside Mainland China, allowing investors to buy and sell within the familiar SGX ecosystem.

While local investors are familiar with Singapore dividend stocks, China’s dividend landscape is much larger, with thousands of stocks to choose from. A dividend ETF simplifies the selection process, providing exposure to a diversified basket of China's high dividend-paying companies.

In this article, we discuss how the Lion–China Merchants CSI Dividend Index ETF seeks to harvest this dividend potential for investors seeking both steady income and exposure to the Chinese market. We are also pleased to have Lion Global Investors provide their insights on the fund’s structure, objectives, and benefits.

Watch our interview video here: https://www.ifasttv.com/videos/list/TXs4DtZk/lion-china-merchants-csi-dividend-index-etf-%7C-lion-global-investors

Introducing the Lion-China Merchants CSI Dividend Index ETF

The Lion-China Merchants CSI Dividend Index ETF seeks to replicate as closely as possible, before expenses, the CSI Dividend Index performance.

Table 1: Key information about the ETF

ETF Details
ETF Name	Lion-China Merchants CSI Dividend Index ETF
Underlying Index	CSI Dividend Index
Base Currency	SGD
Trading Currency	Singapore dollars (SGD), Chinese offshore renminbi (CNH)
SGX Code	INC (SGD), ICH (CNH)
Initial Offer Period	10 March 2025 to 24 March 2025
Listing Date	28 March 2025
Issue Price	SGD 1.00 per unit
Trading Board Lot Size	1 unit
Management Fee	0.50% per annum^
Distribution Policy	Annual. First distribution expected to be declared in December 2025
Source: Lion Global Investors. Data as of 28 February 2025.

^ Up to a maximum of 0.99% per annum of the Net Asset Value of the Fund

1.     We have seen on headlines about how volatile China equities sometimes can be. Can you share why we should consider investing in China now?

At Lion Global Investors, we believe China presents an attractive long-term growth story for investors. China equities have rallied in 2025, driven by breakthroughs in artificial intelligence (AI), with DeepSeek^[1] leading the charge. A recent meeting between President Xi and China's top tech leaders provided another boost to China equities. This meeting signalled clear government support for the private tech sector, dispelling fears of regulatory crackdowns. It suggests that the worst is over and that the government is now working collaboratively with the industry to build an innovative and technologically advanced economy.

While Chinese tech stocks have dominated headlines, dividend-paying stocks have been China’s hidden gems. Investors who allocated capital to the CSI Dividend Index instead of the CSI 300 (which is China’s national benchmark) would have made more returns in the past four years. The performance gap in this period is striking, with the CSI Dividend Index making 21.4%^[2] while CSI 300 losing 16.9%.

The CSI Dividend Index also posted positive gains in the past 3 out of 4 years, compared to the CSI 300 which only delivered one positive year. All these demonstrate the CSI Dividend Index’s potential resilience and ability to withstand market downturns.

Source: Bloomberg, 28 Feb 2025

In 2025 so far, valuations of Chinese dividend stocks still appear undervalued. This is evident when comparing the CSI Dividend Index's P/E ratio to other major indices. As of 28 February 2025, the CSI Dividend Index was trading at a P/E ratio^[3] of just 7.3x. This is significantly lower than the CSI 300 Index, which was trading at 15.8x, the Straits Times Index (STI) at 12.6x, and the S&P 500 Index at 25.4x.

Source: Bloomberg, China Securities Index, as of 28 February 2025

This undervaluation suggests room for upside potential if the CSI Dividend Index’s valuation expands higher. Meanwhile, investors can continue collecting steady dividend payouts while waiting for potential price appreciation.

[1] References to securities are not intended as recommendations to buy or sell.
[2] Past performance is not necessarily indicative of future performance.
[3] Source: Bloomberg as of 28 February 2025. Past performance is not necessarily indicative of future performance. Securities referenced are not intended as recommendations to buy or sell.

2.     Could you share more about the Lion-China Merchants CSI Dividend Index ETF? How is the CSI Dividend Index constructed?

A collaboration between Lion Global Investors and China Merchants Fund Management, the Lion-China Merchants CSI Dividend Index ETF is the first CSI Dividend Index ETF listed outside Mainland China.

The ETF tracks the CSI Dividend Index, which comprises 100 Shanghai-listed or Shenzhen-listed A shares with high cash dividend yields, stable dividends and  a certain scale and liquidity. One key criterion involves continuous cash dividend payout for at least 3 years. The index sets a 10% securities weightage cap and for smaller-cap stocks below RMB 10 billion market value, a 0.5% weightage cap is applied. The index is rebalanced annually in December and will make ongoing adjustments for ad-hoc events like spinoffs. Here are details about the index methodology.

As of 28 February 2025, the CSI Dividend Index has a dividend yield^[4] of 6.2%. This is higher than the Straits Times Index (STI) at 4.7%, CSI 300 Index at 3.0% and the S&P 500 Index at 1.2%.

Source: Bloomberg, China Securities Index as of 28 February 2025

While waiting for potential price appreciation, dividends help investors lock in capital gains regardless of volatility, and improve certainty of a passive income stream.

[4] Past performance is not necessarily indicative of future performance. Securities referenced are not intended as recommendations to buy or sell.

3.     What are some key features of the Lion-China Merchants CSI Dividend Index ETF?

Many China equities ETFs are heavily weighted toward volatile stocks, making them less ideal for investors seeking INCome. The Lion-China Merchants CSI Dividend Index ETF offers targeted exposure financially sound companies with sustainable dividends. The ETF has 3 key features, summarized as Consistent and Steady Income (CSI).

• Consistent: The index focuses on companies with a proven track record of consistent dividend payments at least in the past 3 years.
• Steady: Companies are selected based on their robust financial health. These companies typically have strong cash flows and high free cash flow to dividend coverage ratios.
• Income: This ETF helps investors access a diversified portfolio of dividend-paying stocks, generating a passive income stream.

4.     What is the ETF’s sector composition and some of its top holdings?

As of 31 January 2025, this index is diversified across numerous mature dividend-paying sectors. Finance is the largest sector, making up 24% of the portfolio, with Energy and Industrials rounding out the top three sectors. The index is well-diversified across 10 sectors.

Source: China Securities Index, as of 28 February 2025.

Here is a table showing the index’ top 10 constituents. Among them, one key constituent is Cosco Shipping Holdings which is one of the world’s largest dry bulk carriers. Founded in 1997, HLA is a leading menswear brand in China. In the past 3 years, COSCO consistently maintained a dividend payout ratio^[5] of 30% to 50%. Through this ETF, investors can gain exposure to all these constituents.

Source: China Securities Index as of 28 February 2025.

Securities referenced are not intended as recommendations to buy or sell.

Through the Lion-China Merchants CSI Dividend Index ETF, investors gain a building block to earn stable dividends and invest in INCome.

[5] Past performance is not necessarily indicative of future performance.

5.     Any closing comments?

The Lion-China Merchants CSI Dividend Index ETF is the first CSI Dividend Index ETF listed outside Mainland China. This ETF is an Excluded Investment Product (EIP), so it is accessible to all investors. The ETF is open for subscription on the FSM platform at SGD 1.00 per unit from 10 to 24 March 2025 and can be traded on the SGX starting from 28 March 2025. The SGD ticker is INC (which stands for INCome) and CNH ticker is ICH. With SGD 1.00, we hope you take this opportunity to earn steady dividends and invest in INCome.

^ Up to a maximum of 0.99% per annum of the Net Asset Value of the Fund
*Application Unit size is at the discretion of the Manager. Application Unit size may be less than 50,000 and in multiples of 1 Unit during the Initial Offer Period.

Disclaimer – Lion-China Merchants CSI Dividend Index ETF

This advertisement or publication has not been reviewed by the Monetary Authority of Singapore. It is for information only, and is not a recommendation, offer or solicitation for the purchase or sale of any capital markets products or investments and does not have regard to your specific investment objectives, financial situation, tax position or needs. You should read the prospectus and Product Highlights Sheet of the Lion-China Merchants CSI Dividend Index ETF (“ETF”), which is available and may be obtained from Lion Global Investors Limited (“LGI”) or any of the its distributors and appointed Participating Dealers (“PDs”), for further details including the risk factors and consider if the ETF is suitable for you and seek such advice from a financial adviser if necessary, before deciding whether to purchase units in the ETF.

Investments in the ETF are not obligations of, deposits in, guaranteed or insured by LGI or any of its affiliates and are subject to investment risks including the possible loss of the principal amount invested. The performance of the ETF is not guaranteed and, the value of its units and the income accruing to the units, if any, may rise or fall. Past performance, payout yields and payments, as well as, any prediction, projection, or forecast are not necessarily indicative of the future or likely performance, payout yields and payments of the ETF. Any extraordinary performance may be due to exceptional circumstances which may not be sustainable. Dividend distributions, which may be either out of income and/or capital, are not guaranteed and subject to LGI’s discretion. Any such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value of the ETF. Any references to specific securities are for illustration purposes and are not to be considered as recommendations to buy or sell the securities. It should not be assumed that investment in such specific securities will be profitable. There can be no assurance that any of the allocations or holdings presented will remain in the ETF at the time this information is presented. Any information (which includes opinions, estimates, graphs, charts, formulae or devices) is subject to change or correction at any time without notice and is not to be relied on as advice. You are advised to conduct your own independent assessment and investigation of the relevance, accuracy, adequacy and reliability of any information or contained herein and seek professional advice on them. No warranty is given and no liability is accepted for any loss arising directly or indirectly as a result of you acting on such information. The ETF may, where permitted by the prospectus, invest in financial derivative instruments for hedging purposes or for efficient portfolio management. LGI, its related companies, their directors and/or employees may hold units of the ETF and be engaged in purchasing or selling units of the ETF for themselves or their clients.

The units of the ETF are listed and traded on the Singapore Exchange Securities Trading Limited (“SGX-ST”), and may be traded at prices different from its net asset value, suspended from trading, or delisted. Such listing does not guarantee a liquid market for the units. You cannot purchase or redeem units in the ETF directly with the manager of the ETF, but you may, subject to specific conditions, do so on the SGX-ST or through the PDs.

© Lion Global Investors Limited (UEN/ Registration No. 198601745D). All rights reserved. LGI is a Singapore incorporated company and is not related to any corporation or trading entity that is domiciled in Europe or the United States (other than entities owned by its holding companies).

Disclaimer – China Securities Index Co., Ltd.

All rights in the CSI Dividend Index (“Index”) vest in China Securities Index Co., Ltd. (“CSI”). CSI does not make any warranties, express or implied, regarding the accuracy or completeness of any data related to the Index. CSI is not liable to any person for any error of the Index (whether due to negligence or otherwise), nor shall it be under any obligation to advise any person of any error therein. The Fund based on the Index is in no way sponsored, endorsed, sold or promoted by CSI and CSI shall not have any liability with respect thereto.

Disclaimer – China Merchants Fund Management Company Limited

The references to the company name and logo of China Merchants Fund Management Company Limited in this material do not constitute a guarantee by China Merchants Fund Management Company Limited of the authenticity, accuracy and completeness of the relevant content, nor do they constitute a judgment or guarantee by China Merchants Fund Management Company Limited of the investment value and performance of the Lion-China Merchants CSI Dividend Index ETF. China Merchants Fund Management Company Limited assumes no liability for this material or the investors’ investment in the Lion-China Merchants CSI Dividend Index ETF.

Past performances of China Merchants CSI Dividend ETF and CSI Dividend Index neither are indicative of their future performances, nor constitute a guarantee of investment returns or any investment advice. Investing in funds involves risks, and caution is advised.