Mainland share buybacks offer short-term relief for Hong Kong market, analyst says
Several mainland Chinese companies have announced A-share buybacks, with distiller Wuliangye completing a 3.01 billion yuan stock purchase plan. An analyst said the moves primarily benefit A-shares but could provide short-term sentiment relief for Hong Kong-listed H-shares.
Several mainland Chinese listed companies have announced share buybacks of their A-shares, with distilling giant Wuliangye completing its stock purchase plan worth 3.01 billion yuan (US$416 million). Despite the buyback, the company's share price closed nearly 1 per cent lower on the day and has fallen about 29 per cent so far this year.
Henan-based mining firm CMOC Group said it plans to spend between 1 billion and 2 billion yuan to repurchase its A-shares. The announcement helped lift the stock by nearly 4 per cent during intraday trading, before it closed more than 2 per cent higher. Its Hong Kong-listed H-shares finished the session 0.4 per cent higher.
Electronic ceramic component maker Sunlord Group said it received a loan commitment letter from China Construction Bank's Chaozhou branch for up to 810 million yuan, with a maturity of no more than three years, to be used exclusively for share repurchases. Sunlord's A-shares closed more than 2.6 per cent higher, while its H-shares gained 3 per cent.
Senior analyst Zeng Yongjian said the repurchase plans are mainly concentrated in the A-share market. If the bought-back shares are cancelled, earnings per share would increase, but the real benefit and impact would still mainly affect A-shares. He noted that mainland and Hong Kong capital markets have different investor structures, so the effect may not be proportionally transmitted to H-shares, although the move could offer short-term sentiment relief for Hong Kong stocks.
Zeng added that if a company uses debt to fund the buyback, the key is whether future earnings growth can exceed the financing cost. He stressed that a company's business prospects and profitability remain the most important considerations for investors.