Chinese state controlled companies reveal US$547 million of share purchases, buy-backs as Beijing steps up market support
- The government will increase its stakes in five listed state firms while state-owned Baoshan Steel plans to buyback its shares as China moves to support weak bourses
- Last week, Central Huijin Investment, a unit of the nation’s sovereign fund, bought shares in the big four state-owned banks for the first time in eight years
These plans, involving a total of around 4 billion yuan (US$547 million), were disclosed on the Shanghai and Shenzhen exchanges on Monday night. State-owned Baoshan Steel revealed it would spend as much as 3 billion yuan on buy-backs over the next 12 months, to be held as treasury stock for the purposes of future employee incentives.
The controlling shareholder of green-energy producer China Three Gorges plans to increase its stake in the company by spending between 300 million and 500 million yuan through the secondary market in the coming year, while China Railway Construction and surveillance camera maker Hangzhou Hikvision Digital Technology said their biggest shareholders would each buy 300 million yuan worth of their stocks over the next six months.
Leading miner China Coal Energy said its parent plans to buy as many as 50 million shares in the next 12 months, but did not reveal financial details, and semiconductor maker China Resources Microelectronics said its No 1 shareholder would spend at least 100 million yuan on increasing its ownership over the coming year.
“The stake increases and buy-backs by central SOEs are conducive to guiding values to return to rationale and stabilising the capital market,” said Citic Securities in a research note on Tuesday. “The plans showcase the acknowledgement by the shareholders and the management of central SOEs, and their confidence on future development and the long-term values.”
Investors have responded positively to Monday’s announcement. Shares of Baoshan Steel rallied 5.1 per cent to 6.20 yuan on Tuesday in Shanghai, the steepest gain since December. The gains in China Three Gorges, China Railway Construction, China Resources Microelectronics and Hangzhou Hikvision ranged between 0.5 per cent and 1.1 per cent.
Baoshan Steel, which is capitalised at 138 billion yuan, trades at a 30 per cent discount to its book value, and the gap for China Railway Construction is even wider at 53 per cent, according to data from information provider Shanghai DZH.
In 2018, Chinese stocks bottomed out following four bouts of buy-backs, according to Citic Securities. A similar pattern was seen on three occasions between 2020 and 2022 following corporate buy-backs, the brokerage said.
Other state-owned corporations have also made buy-backs or stake increases recently. China Mobile, the nation’s biggest wireless phone operator, also said on Monday it had spent 1.5 billion yuan buying 26.3 million yuan-denominated shares, or a 0.12 per cent stake, over the past 10 months. China Petroleum and Chemical Corp, the nation’s biggest oil refiner also known as Sinopec, said it bought back 5 million shares of its Shanghai-listed stock for 29.3 million yuan on Monday, bringing the total value of repurchases to 267.3 million yuan since September 21.
More than 1,000 companies, trading on mainland exchanges, have conducted stock buy-backs worth a combined 51.7 billion yuan through September this year, according to East Money Information. That compares with aggregate repurchases of 77 billion yuan made in all of last year, the data showed.
