Hong Kong-listed companies are taking advantage of the recent dip in the stock market by increasing their share buybacks. This move goes against the trend seen in other Asian markets, where gains have been observed. Hang Seng Indexes Co. predicts that the scale of these repurchases will reach HK$92.9 billion ($11.9 billion), which is 3.9 times higher than the average annual buyback value of HK$23.9 billion in the past five years. As of now, these buybacks have already amounted to around HK$73.5 billion.
This surge in share buybacks follows a similar trend from last year when corporate stock repurchases rose by 175% during a decline in the Hang Seng Index. Currently, the benchmark index has experienced a drop of approximately 9% in 2023, making Hong Kong’s market the worst-performing major regional index worldwide.
The significant increase in buyback value suggests that these companies view their listed shares in Hong Kong as undervalued. By buying back their own shares, these companies aim to signal confidence in their own prospects and boost shareholder value. This strategy allows them to make use of excess cash reserves and support their stock prices amidst a market downturn.
It is worth noting that share buybacks can have multiple benefits for companies. Firstly, they can provide an efficient means of returning capital to shareholders. Secondly, by reducing the number of outstanding shares, buybacks can increase earnings per share and potentially drive stock prices higher. Lastly, buybacks can help fend off activist investors who may attempt to gain control or influence over the company.
In summary, Hong Kong-listed companies are capitalizing on the market slump by increasing their share buybacks. This strategy not only reflects their belief in the undervaluation of their own shares but also aims to enhance shareholder value and deter potential activist investors.
– Share buybacks: A corporate action in which a company repurchases its own outstanding shares from the market.
– Hang Seng Index: The benchmark stock market index of the Hong Kong Stock Exchange, comprising the top 50 companies listed on the exchange.