(Bloomberg) -- One of the hottest trades in China’s stock market has reached dizzying heights, and a guideline by the regulator is adding fuel to the rally. 

The Shanghai Stock Exchange Dividend Index has surged almost 20% this year to its highest level since mid-2015, led by cyclicals such as energy firms and banks. That pushed its 14-day relative strength index this week to nearly 80, far above the level of 70 typically seen as overbought.

Investors began chasing China’s dividend plays in late 2023 amid a low-rate environment and a stock market rout. The trade got a big lift after the nation’s top securities regulator urged companies to boost dividend payouts in a new guideline released Friday.

The dividend index’s estimated yield over the next 12 months has fallen to the lowest in three years. There may still be scope for further gains with one of the most active ETFs tracking the dividend stocks set to see another record inflow in April. 

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