BEIJING, October 17 (TMTPost)— A host of Chinese companies announced their plans or moves to repurchase shares the same day, joining in a buyback spree fuelled by the policy stimulus.
A total of ten state-owned listed companies, including Sinopec, Baosteel Co., Ltd., COSCO Shipping Holdings Co., Ltd., China Mobile, China Railway Construction Corporation, China Coal Energy, China Three Gorges Corporation, Power Construction Corporation of China, Hikvision and China Resources Microelectronics Limited, released statements on Monday, promising billions of dollars’ input for shares repurchase. Among these firms, Baosteel said it plans to spend no more than RMB3 billion to buy back at least 330 million shares at up to RMB8.86 apiece. Two of these companies disclosed increase in stakes worth of RMB2.343 billion. Five of them announced their plans to buy more shares with funds ranging from RMB500 million to RMB1.63 billion, and two of them said they have proceeded with buyback program worth of RMB475 million.
Based on the close price on Monday, the market value of these ten enterprises totaled RMB3.97 trillion, and the funds involved in the increase in holdings and repurchase are approximately between RMB6 billion and RMB8 billion.
As of Monday, there are 18 state-owned enterprises that disclosed buyback or raise stakes. More than 40 listed companies released disclosures about acquiring more shares by shareholders, management or dealships since September, and over 60 companies unveiled their share repurchase programs in the same period, the state-backed financial and securities newspaper the Securities Times estimated. Prior to Monday’s statements, more than a hundred Chinese companies engaged in buybacks or withdrawal of share sales in August after the government introduced new rules to shore up the stock market.
The wave of buyback and increase of stakes will be deemed as a positive signal of economic recovery and improved market expectations, and will promote the construction of China’s multi-level capital market, TF International Securities analyst Liu Chenming commented.
The recent buyback announcements came as Beijing took more actions to boost the stock market. The sovereign wealth fund Central Huijin Investment Ltd. (Central Huijin) last week increased stakes in four leading banks.
Central Huijin acquired 27.61 million shares in China’s biggest bank--the Industrial and Commercial Bank of China on Wednesday, and the same day saw the fund bought 37.27 million shares in the Agricultural Bank of China, around 24.89 million shares in the Bank of China, and about 18.38 million shares in the China Construction Bank, according to separate statements of these four banks late Wednesday. As a shareholder of these state-owned banks, Central Hui spent a total of RMB477 million to increase its holdings based on close of the banks’ shares that day. The four lenders said Central Huijin will continue its purchase of their shares at the secondary market over the next six months.
The move was Central Huijin’s first acquisition of shares since August 2015, when the company invested about RMB20 billion to increase holdings of four major state-backed banks during Chinese equity market turmoil. While the recent investment was relatively small compared to the input eight years ago, Central Huijin’s move highlighted Beijing’s desire to boost the stock market. Furthermore, Central Huijin expressed an intention to continue purchasing more shares in the coming months. Such proactive stance is expected to enhance market sentiment in the near term.
The Securities Regulatory Commission launched new rules at weekend to curb short-selling activities. The securities regulator said it will reinforce management of securities lending and re-lending businesses and restrict lending of shares by strategic investors and senior management in newly-listed companies. The regulator also required hedge funds wishing to short sell a stock to have 100% of the value of transaction in their account while other investors to hold at least 80%.
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