2023 has been a rather difficult year for several Chinese companies and their Hong Kong-listed shares. Amid the economic slump and plunging share prices, Hong Kong-listed companies have resorted massively to share buybacks as a means of rewarding shareholders. Topping the list of buybacks are Chinese internet giant Tencent Holdings (HK:0700), life insurance behemoth AIA Group (HK:1299), and global investment bank HSBC Holdings (HK:0005).
Shares of Chinese companies witnessed huge sell-offs as the nation’s economic indicators showed poor signs of a bounce back. Further, China’s property sector underwent a colossal fall led by big names such as China Evergrande (HK:3333) and Country Garden (HK:2007). The plunge in share prices and huge foreign outflows has considerably dragged down the value of the Hong Kong stock market (down 17%), marking a fourth straight year of decline for the index. Notably, a South China Morning Post report noted that 64 of the 82 members listed on the Hang Seng Index have reported losses so far this year.
Why are Companies Resorting to Share Buybacks?
As per a Shanghai Securities News report that cited data from eastmoney.com, 186 companies have bought back shares worth HK$111.4 billion in 2023 so far. The figure surpasses buybacks of HK$104.9 billion carried out in 2022 and significantly exceeds the HK$38.1 billion spent in 2021. Share buybacks also mean that companies view their shares as undervalued and expect the stock prices to improve in the future.
Notably, Tencent has spent HK$41.8 billion, AIA has spent HK$26.8 billion, and HSBC has spent HK$19.4 billion on stock buybacks this year. Last week, Chinese sportswear company Li Ning (HK:2331) announced a share repurchase plan worth HK$3 billion. Also, pharmaceutical company Wuxi Biologics (HK:2269) and e-commerce platform Meituan-Dianpin (HK:3690) announced share buybacks to boost share prices. Share buybacks may be a means to create value for shareholders, but the operational performance of companies will only improve once the Chinese economy rebounds.
We used the TipRanks Stock Comparison Tool to gauge how these above-mentioned companies are faring based on TipRanks Essentials tools.
