China share buybacks climb to 3-year high amid market rout

HONG KONG – Chinese companies are ramping up share buybacks, playing their part in a widening rescue campaign to stem a US$7 trillion (S$9.4 trillion) rout in the world’s second-biggest stock market.

Firms listed in mainland China and Hong Kong spent 14 billion yuan (S$2.65 billion) and HK$21 billion (S$3.6 billion) repurchasing shares last month, respectively, each marking a record since 2021 when Bloomberg began compiling the data.

Share buybacks have historically been a regular feature in Beijing’s toolbox to prop up a slumping market, with authorities renewing the plea on Feb 6 for companies to do the same to help stabilise conditions. Despite the collective effort, the amount is usually too small to make any difference in a market that is still counting on heavier state intervention and bolder policy stimulus to turn the corner.

“Company buybacks and national team buying are positive signals,” said Jian Shi Cortesi, a fund manager at GAM Investment Management, referring to state funds tasked to support markets. “Corporations know their businesses better than outside investors, and their record buybacks show that they see their business undervalued in the stock market.”

WuXi AppTec and Will Semiconductor, whose shares have recently tanked on fears of US sanctions, led the wave of buybacks on the mainland bourses last month. In Hong Kong, tech behemoth Tencent Holdings and delivery giant Meituan were ahead of the pack.

The fact that such self-rescue moves failed to stem the broader market’s rout last month, when the mainland benchmark CSI 300 Index lost 6.3 per cent, goes to show the listed firms’ limited impact.

After a tough start to the year, Chinese stocks staged a rare rally on Feb 6 only after more concrete signs emerged of stronger policy support, including a pledge by the sovereign wealth fund to further increase holdings of exchange-traded funds. News that regulators plan to brief President Xi Jinping on markets also fueled optimism about more concerted efforts.

“In the past, buybacks were often seen as a signal of market reaching a near-term bottom, but this time is different because the problem in China is structural,” said Kenny Wen, head of investment strategy at KGI Asia. “Even if some corporate action can trigger a near-term rebound, we are not out of the woods yet.” BLOOMBERG

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