As of the end of August, a total of 1,463 listed companies have implemented stock buybacks, indicating a warming trend in buybacks and substantial shareholding increases.
This year, A-share listed companies have ramped up their buybacks and significant shareholding increases. Notably, many companies have executed buybacks to optimize their capital structures, while executives and major shareholders have increased their holdings, reflecting a higher frequency and speed of implementation compared to previous years.
Large-scale buybacks have become increasingly common. The share buyback mechanism in the capital market serves as a foundational arrangement, optimizing capital structure, enhancing investment value, and strengthening investor return mechanisms. By the end of August, a total of 1,127 listed companies on the Shanghai and Shenzhen stock exchanges had disclosed 1,204 new buyback plans, a year-on-year increase of 814 companies and 882 plans, respectively. The planned buyback amounts range between 78.9 billion to 146.2 billion yuan, reflecting an increase of 40.9 billion and 75.8 billion yuan compared to last year. Additionally, 1,463 companies have actively executed buybacks, with the total amount exceeding 100 billion yuan, a significant year-on-year surge.
Wang Dan, a researcher at the Bank of China Research Institute, stated that the heightened activity in stock buybacks among A-share listed companies demonstrates their confidence in future prospects and recognition of inherent value, sending positive signals to boost market sentiment.
The trend of hefty buybacks this year has been significant in instilling investor confidence. According to reports, at least 14 companies, including WuXi AppTec, Sanan Optoelectronics, CATL, and SF Express, have carried out buybacks exceeding 1 billion yuan.
The surge in buybacks and increases in holdings can be attributed to several factors. Chief economist Deng Haiqing of AVIC Fund noted that regulatory authorities have encouraged companies to use buybacks and increases to stabilize stock prices and market confidence, implementing a range of policies, including lowering the thresholds for buybacks and simplifying related procedures. Additionally, many A-shares have reached new low valuations this year, with prices falling below long-term reasonable levels, underscoring the attractiveness of long-term investment. Furthermore, some listed companies are reporting improved profitability and cash flow, opting to deploy some of their cash towards stock buybacks, which not only boosts earnings per share and stabilizes stock prices but also conveys positive signals to the market, enhancing investor confidence.
The prevalence of cancellation buybacks has gained traction, with a growing number of companies opting for this method under encouraging regulatory guidance. Industry insiders believe that cancellation buybacks can lead to increased per-share distributable profits and have a more pronounced effect on stabilizing and recovering the capital market.
The new “National Guidelines” emphasize guiding listed companies to repurchase shares for cancellation as part of their strategies. Rules revised at the end of April now allow buybacks followed by cancellations to be included in the company’s cash dividend calculations. The China Securities Regulatory Commission also encourages establishing mechanisms for implementing share buybacks to enhance shareholder returns and optimize governance structures.
By the end of August, the Shanghai and Shenzhen stock exchanges disclosed a total of 170 new cancellation buyback plans, representing a year-on-year increase of 136 plans, with planned amounts ranging from 18.9 billion to 32.4 billion yuan, marking increases of 12.1 billion and 20.3 billion yuan, respectively. Notable companies like WuXi AppTec, Yili Group, and CRRC have set cancellation limits above 1 billion yuan, with Yili leading at 2 billion yuan.
Moreover, numerous companies that previously announced buyback plans are now actively adjusting their buyback purposes to directly return value to investors through capital reduction.
Given factors such as anticipated interest rate cuts by the Federal Reserve, enhanced domestic policy support, and a strong rebound in the renminbi, market sentiment is expected to recover significantly. According to Wang Dan, many quality listed companies are seizing this optimal window to restructure their equity, reinforcing share repurchases at low valuations under favorable expectations to enhance shareholder returns and future company valuations.
Additionally, companies are exhibiting a swift implementation of their buyback proposals. This year, buyback plans show characteristics of accelerated execution and increased frequency, reflecting companies’ resolve to provide tangible returns to investors, which is crucial for uplifting market sentiment.
According to the Share Repurchase Guidelines, the period for companies to repurchase shares should not exceed 12 months from the approval date. However, many companies are now opting for a 6-month or even 3-month timeline, significantly hastening the speed of implementation.
For instance, Xianheng International disclosed a buyback plan on July 24, intending to repurchase between 50 million to 60 million yuan for employee stock ownership plans within six months. On August 21, the company announced its first buyback, acquiring 1.7638 million shares for a total of 16.15 million yuan.
Additionally, many firms are increasing their buyback frequencies, promptly launching new buyback plans following the completion of previous rounds.
As of the end of August, 595 companies on the Shanghai Stock Exchange had disclosed new shareholding increase plans by major shareholders and executives, representing a year-on-year increase of 447 companies, with the total increase cap reaching 47.6 billion yuan, up 34.4 billion from the previous year. Notably, nine companies had increase limits exceeding 1 billion yuan, while 17 companies surpassed 500 million yuan, sending strong signals to the market about the optimistic outlook for their future developments.
Deng Haiqing highlighted that executives investing their own funds to increase their holdings reflects internal recognition of the company’s long-term investment value and growth potential, sending positive signals to the market that can effectively boost investor confidence.
