AIA, Tencent, Xiaomi – some of Hong Kong’s top listed firms – boost share buy-backs as bear market sets in
- At least 26 companies disclosed buy-backs totalling HK$667 million (US$85.2 million) on Tuesday, according to data compiled by Securities Times
- AIA, which has been the most active company in buying back its shares this year, has spent HK$12.5 billion
Insurer AIA, the Hang Seng Index’s biggest constituent with an 8.1 per cent weighting, spent HK$132 million buying back 1.73 million shares on Tuesday, while second-ranked Tencent, with an 8 per cent weighting, bought back 1.12 million shares for HK$352 million for a sixth straight day of repurchases, according to exchange filings. Chinese smartphone maker Xiaomi bought 2.2 million shares for HK$23.2 million after buying back the same number of shares a day earlier.
The slew of buy-backs may boost the fragile sentiment on the Hong Kong market, which has underperformed many of the world’s major stock benchmarks this year, as China’s reopening trade has fizzled out amid a dismal growth outlook and escalating geopolitical risks.
After an 8 per cent decline this year, the Hang Seng Index trades at a 9 per cent premium to the book value, compared with an average of 20 per cent over the past decade, according to Bloomberg data.
The valuation of the Hang Seng Index has fallen to a low level and now represents long-term investment value, said Cliff Zhao, a strategist at CCB International in Hong Kong.
“We continue to recommend investors maintain a balanced allocation of value and growth stocks, and bargain hunt for healthcare, information, and consumer leaders with sustained top-line growth recovery,” he said.
Share buy-backs typically occur when big shareholders see value in stocks after declines and increase their stakes to protect the interests of small investors and market values. Some investors view big stock repurchases as a sign that the broader market is about to bottom out.
AIA has been the most active Hong Kong-listed company in buying back its shares this year and has spent HK$12.5 billion, according to Securities Times’ data. The insurance firm is followed by Tencent at HK$8.15 billion and real-estate investment firm ESR Group at HK$499 million, the data showed.
AIA’s shares have slumped 13 per cent this year, those of Tencent have fallen 2.3 per cent and ESR’s stock has lost 31 per cent.
The Hang Seng Index flirted with the bear-market level on Wednesday, tumbling by as much as 3 per cent to take its decline from a January 27 high to 20.5 per cent, after an official purchasing managers’ gauge showed China’s manufacturing contracted for a second month in May. The stock benchmark recovered some lost ground to close 1.9 per cent lower.
Deng Lijun, an analyst at Northeast Securities, said the market may be too pessimistic and has hit a bottom.
“At this stage, current prices fully reflect the deterioration of fundamentals,” he said.
