Since the beginning of this year, the buyback scale in the Hong Kong stock market has increased significantly. The total repurchase amount has exceeded 180 billion Hong Kong dollars, while the total buyback amount for the whole of last year was over 120 billion Hong Kong dollars.

Behind the record buyback scale in the Hong Kong stock market, the leading internet company in the mainland has taken up the buyback 'banner', while internationalized leading companies and local leading companies in Hong Kong have also made strong buybacks.

Some experts say that buybacks demonstrate the confidence of relevant Hong Kong stocks companies in their intrinsic value, have a positive overall impact on the Hong Kong stock market, and help boost investor confidence.

The buyback scale in the Hong Kong stock market this year has far exceeded the total for last year.

The buyback scale in the Hong Kong stock market has increased significantly since the beginning of the year. According to data from Hithink Royalflush Information Network, the total buyback amount from the beginning of the year to date has exceeded 180 billion Hong Kong dollars, well surpassing the total buyback amount for the entire year of the Hong Kong stock market last year (which was over 120 billion Hong Kong dollars).

This trend and phenomenon are also confirmed by the information recently released by the company.$Hang Seng Index (800000.HK)$According to the blog released by Hang Seng Index Company on August 20, from the beginning of the year to August 16, 2024, the buyback amount in the Hong Kong stock market has surpassed last year's total by 29.8%, reaching a historical new high of 164.8 billion Hong Kong dollars.

The increase in the repurchase of Hong Kong-listed companies is not only reflected in the amount of repurchase, but also in the number of repurchases. According to iFinD data, the number of Hong Kong-listed companies that have repurchased from the beginning of this year has exceeded 220, which also exceeds the total number of listed companies in the Hong Kong stock market that repurchased last year. Data shows that the number of Hong Kong-listed companies that repurchased last year under the same statistical caliber was around 200.

In stages, the scale of stock repurchases in Hong Kong has remained at a high level in recent months. According to iFinD data, the total repurchase amount in June this year reached HKD 38.1 billion, the highest so far this year. Although there was a slight decrease in July and August, it still exceeded the average monthly repurchase scale in the first half of the year.

Multiple companies have increased their efforts in stock repurchases.

Reporters found that the stock repurchases in the Hong Kong stock market this year also have some other characteristics.

Structurally, among the companies with large-scale repurchases this year, internet giants with their main business in mainland China have taken the lead in repurchases with steady operations and strong financial strength, becoming the main force in the Hong Kong stock market's repurchases this year. At the same time, internationalized leading companies and local leading listed companies in Hong Kong have also actively repurchased.

For example, among the companies that repurchased more than HKD 10 billion this year,$TENCENT (00700.HK)$the amount of repurchase in the year exceeded HKD 70 billion. $HSBC HOLDINGS (00005.HK)$Please use your Futubull account to access the feature.$MEITUAN-W (03690.HK)$N/A.$AIA (01299.HK)$The repurchase amount exceeded 20 billion Hong Kong dollars during the year.$DONGYUE GROUP (00189.HK)$and$XIAOMI-W (01810.HK)$Please use your Futubull account to access the feature.$KUAISHOU-W (01024.HK)$N/A.$HANG SENG BANK (00011.HK)$and$SWIRE PACIFIC A (00019.HK)$N/A.$CK ASSET (01113.HK)$,$WUXI BIO (02269.HK)$and$YUM CHINA (09987.HK)$ The amount of repurchases by the company has all exceeded 1 billion Hong Kong dollars this year.

With the end of the sensitive period for performance disclosure, some leading Hong Kong stocks have recently restarted their repurchases. For example, Tencent Holdings resumed a new round of repurchases on August 16 after a one-month suspension of repurchase operations, and Meituan resumed repurchasing stocks on September 2 after a one-month suspension of repurchase operations. In addition, data also shows that several companies in the Hong Kong stock market have been more continuous in repurchasing stocks in recent months, such as Kuaishou and Swire Pacific, which have been continuously repurchasing stocks in the past few months.

Compared with last year, the proportion of repurchase amounts by newly added repurchase companies this year has obviously expanded. According to the statistics released by Hang Seng Index Company recently, as of August 16, 76 listed companies have newly joined the repurchase this year, with a repurchase amount of 33.6 billion Hong Kong dollars, accounting for 20.4% of the total repurchase amount since the beginning of the year (the repurchase amount by newly added repurchase companies in 2023 accounted for 7% of the total). For example, Meituan did not repurchase shares last year, but this year it joined the camp of share repurchases and quickly ranked among the top Hong Kong stocks companies in terms of repurchase scale.

Many companies have significantly increased their buyback efforts. For example, Xiaomi Group bought back around 1.5 billion Hong Kong dollars last year, and the buyback amount has already exceeded 3 billion Hong Kong dollars this year.$CSPC PHARMA (01093.HK)$The buyback amount was over 0.2 billion Hong Kong dollars last year, and the buyback amount of CSPC Pharma has exceeded 0.8 billion Hong Kong dollars this year.

Experts: Buybacks are beneficial for boosting investor confidence and have a positive impact.

Regarding the reasons for the active buybacks in the Hong Kong stock market this year, one market view believes that the overall valuation of the Hong Kong stock market has been relatively low in recent years, causing related companies' stock prices to be under pressure and undervalued. This has motivated companies to enhance their buybacks in order to support their stock prices.

Regarding the significant increase in the size of buybacks in the Hong Kong stock market this year, Zhang Zhiwei, Chief Economist and President of BOCI Securities, believes that there are several reasons.

On the one hand, Zhang Zhiwei believes that the market value of related Hong Kong stocks is relatively cheap, and they have previously experienced significant declines. From the perspective of the companies, buybacks demonstrate their confidence in their intrinsic value. He gives the example that in other markets such as the US stock market, buybacks have been more significant and have had a clear impact on stock prices.

On the other hand, Zhang Zhiwei believes that some Hong Kong-listed companies have performed well in terms of revenue and profits, but their stock prices have not fully reflected this. This may be due to some external factors affecting the correlation between the company's stock price and its actual operations, which has also become a reason for buybacks.

Pairepai Wealth Financial Planner Zeng Hengwei also believes in an interview with reporters that Hong Kong stock companies' frequent share repurchases, and the scale exceeds last year, there are multiple reasons behind this phenomenon. First of all, from the perspective of the company's fundamentals and confidence, share repurchases are usually seen as a signal of management's confidence in future profitability. In a sluggish market, when companies choose to repurchase shares, it often means that they believe the stock is undervalued and hope to stabilize and boost the stock price through this. For example, the share repurchase behavior of leading companies such as Tencent Holdings and Anta International not only demonstrates confidence in their own stock price, but also sends positive signals to the market.

Secondly, changes in the market environment have also contributed to the increase in share repurchases. With the gradual recovery of the global economy, the market environment has become more favorable, and companies are more inclined to enhance shareholder returns through share repurchases. As one of the international financial centers, the increase in share repurchases in the Hong Kong stock market also reflects the recovery of market confidence.

Furthermore, changes in policies and regulations are also important factors driving the increase in share repurchases. The newly revised share repurchase rules of the Hong Kong Stock Exchange allow listed companies to hold repurchased shares in inventory and retain their listing status. This change improves the flexibility of listed companies in repurchasing stocks and reduces operating costs, thereby promoting the increase in share repurchases. After the new rule on repurchased shares took effect, listed companies are no longer required to cancel the repurchased shares, which provides them with more capital management tools and helps enhance market competitiveness.

In addition, the liquidity and interest rate environment in the capital markets also affect share repurchases. The current low interest rate environment reduces corporate financing costs, making share repurchases a cost-effective capital allocation strategy. The liquidity in the Hong Kong stock market is relatively good, providing a good foundation for share repurchases.

Feng Xiang, Chief Investment Officer of Tongwei Investments, believes that the Hong Kong stock market has always been more internationalized and is heavily influenced by global capital flows. Since the Federal Reserve entered the interest rate hike cycle, the liquidity in the Hong Kong stock market has been a major problem, leading to widespread undervaluation. The market anticipates that the Federal Reserve will enter an interest rate cut cycle this month, and the improvement in liquidity will bring about a rebound in valuations. At this time, when listed companies choose to repurchase shares, it is beneficial for improving shareholder returns and stabilizing the stock price, which is a good thing for the stable development of the market.

Feng Xiang believes that under the new inventory stock mechanism, Hong Kong listed companies' repurchased stocks no longer need to be compulsorily cancelled, and the provisions related to the cancellation of repurchased shares are removed. This helps issuers manage the capital structure more flexibly and is conducive to aligning Hong Kong with international market practices. Although it may increase regulatory risks in market manipulation and insider trading, these risks can be mitigated as long as there is an appropriate framework to regulate the resale of inventory stocks. In addition to improving shareholder returns, Hong Kong listed companies can use inventory stocks for employee stock-based incentives, or gradually resell the inventory stocks or use them as consideration for acquiring assets to achieve flexible financing, which is conducive to enhancing the enthusiasm and flexibility of share repurchases by Hong Kong listed companies and further improving overall shareholder returns.

As for the impact of share repurchases on the future market, Zhang Zhiwei believes that share repurchases have a positive impact on the overall Hong Kong stock market and are conducive to boosting investor confidence and helping in various aspects. He believes that the expected interest rate cut by the United States is actually beneficial to the Hong Kong stock market from an international perspective.

Zeng Hengwei believes that the active share repurchases in the Hong Kong stock market will have a positive impact on the future trend of the market. It is expected to boost stock prices in the short term, enhance market confidence, and improve market structure. However, investors should also pay attention to potential risk factors such as market sentiment volatility and changes in the global economic situation, and maintain a cautious attitude and formulate reasonable investment strategies.

Feng Xiang believes that there has been a gradual sign of recovery in the Hong Kong stock market before the second quarter of this year. Most of the repurchased stocks such as Tencent and Xiaomi have remained stable or risen in price this year. Under the attractive valuation and favorable liquidity conditions of the Hong Kong stock market, eligible investors can consider allocating some valuable and growing symbols in the Hong Kong stock market.

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