Hong Kong-listed companies ploughed record US$14 billion into buy-backs in 2023 as sell-offs made stock market the world’s cheapest

Share buy-backs by Hong Kong-listed companies have hit a record this year, as unrelenting sell-offs have made Asia’s third-largest stock market the cheapest in the world.

Some 186 companies have spent HK$111.4 billion (US$14.3 billion) repurchasing their own shares, the Shanghai Securities News reported, citing data from eastmoney.com. The amount has already surpassed the HK$104.9 billion spent on buy-backs in 2022 and is well ahead of the HK$38.1 billion spent the year before that, according to the report.

Social-media giant Tencent Holdings, insurer AIA Group and HSBC Holdings have spent the most on buy-backs this year, it said.

The repurchasing spree has come as the Hang Seng Index heads for an unprecedented fourth straight year of decline, as China’s slowdown and the most aggressive interest-rate hikes in the US for four decades trigger foreign outflows.

The benchmark gauge has dropped 17 per cent so far this year, and is trading at 5.5 times realised earnings as the cheapest major market globally, according to Bloomberg data. That has contributed to HK$656 billion being wiped off the value of the Hong Kong market in 2023.

“Buy-backs typically mean that listed companies believe their own share prices are far below the intrinsic values,” said Shen Fanchao, an analyst at Zheshang International in Hong Kong. “That sends a positive signal to investors that shares are undervalued, helping to stabilise confidence and stock prices.”

Chinese sportswear maker Li Ning is the latest company to jump on the bandwagon. The firm, which was founded by the eponymous gymnastics world champion, said on Monday night that it would buy back its own shares for as much as HK$3 billion in the next six months.

Shares of Li Ning jumped 4.4 per cent on the news to HK$19.10, paring its year-to-date loss to 72 per cent. The stock is the worst performer on the Hang Seng Index in 2023.

Last week, food delivery giant Meituan, Hong Kong conglomerate Swire Pacific and pharmaceutical firm Wuxi Biologics unveiled a combined US$2.4 billion of buy-back programmes in the wake of weak economic data from China and a bearish business outlook for the Chinese drug maker.

WeChat operator Tencent has topped the repurchase rankings, splurging HK$41.8 billion on its stock, according to the Shanghai Securities News. It is followed by AIA on HK$26.8 billion and HSBC on HK$19.4 billion. Shares of Tencent have fallen 1.8 per cent this year and those of AIA have slumped 28 per cent, while HSBC’s stock has risen 25 per cent.

Of the 82 members of the Hang Seng Index, 64 have posted losses so far in 2023. The worst performers were Li Ning, property-management firm Country Garden Services Holdings and car dealer Zhongsheng Group Holdings, with declines of at least 58 per cent.

Official data over the weekend showed that both consumer and producer prices in China fell in November, suggesting mounting deflationary pressure. Data due on Friday may show growth of industrial production and retail sales picked up, according to the consensus estimate of economists tracked by Bloomberg.

“There’s been no big change in China’s economic fundamentals, and the magnitude of supportive policies has fallen short of market expectations,” Essence Securities said in a note on Tuesday. “The decline in the Hong Kong market reflects the pretty weak risk appetite. The market is still in the process of finding the bottom.”

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Hong Kong-listed companies ploughed record US$14 billion into buy-backs in 2023 as sell-offs made stock market the world’s cheapest

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