The Insider

Directors boost share buybacks during Friday’s Brexit sell-off

Nineteen companies were active Friday, providing share price support through repurchases

PUBLISHED : Sunday, 26 June, 2016, 3:13pm
UPDATED : Monday, 16 January, 2017, 10:28am

There was a strong response by Hong Kong-listed firms during Friday’s Brexit sell-off with 19 companies that recorded 37 transactions worth HK$164.4 million.

The figures were sharply up from the daily average of 12 companies, 22 trades and HK$72 million from Monday to Thursday. The turnover on Friday also accounted for 36 per cent of the total value of repurchases last week. Overall, a total of 28 companies recorded 126 repurchases worth HK$451 million based on exchange filings from June 20 to 24.

The number of firms and value were not far off from the previous week’s 27 companies and HK$469 million while the number of trades was sharply down from the previous week’s 149 transactions. Ten of the companies that moved in to support their share prices on Friday saw their shares close higher from their average buyback prices with gains of 1 per cent to 2.9 per cent or an average of 1.7 per cent.

The biggest gainers were Feiyu Technology, Sino Land and Hysan Development with gains of 2.9 per cent, 2.2 per cent and 1.85 per cent, respectively from their average purchase prices. Meanwhile, only one company that bought back shares on Friday reported a price fall with the shares of SinoMedia Holdings closing 1.2 per cent below the company’s average buyback price.

While there was a surge in the buyback activity during the steep correction on Friday, directors’ response to Brexit will not be known until early next week as insider filings were only up to June 23 due to the three-day reporting requirement. Past major market correctionsindicate a strong response from directors from this recent sell-off particularly on the buying side.

Those past major market corrections include the Asian Currency Crisis in fourth quarter of 1997, World Trade Center Attacks on September 11, 2001, Sars in 2003 and the Global Financial Meltdown in 2008. A total of 47 companies recorded 244 purchases worth HK$320 million last week versus 14 firms with 66 disposals worth HK$55 million. The number of companies and trades on the buying side were down from the previous week’s 52 firms and 252 purchases. The buy value, however, was up from the previous week’s acquisitions worth HK$266 million. On the selling side, the number of companies and trades were not far off from the previous week’s 12 firms and 64 disposals while the sell value was sharply down from the previous week’s disposals worth HK$79.5 million.

Another sign that the buying will pick up this week is the number of stocks that fell following insider purchases last week. A total of 19 of the 47 firms that recorded insider buys last week saw their share prices decline by 1 per cent to 17.5 per cent or an average of 3.5 per cent from directors’ average purchase prices on Friday.

The picture is not entirely bleak however as 13 stocks closed 1 per cent to 14 per cent or an average of 3.8 per cent higher from directors’ average purchase prices last week. On the selling side, nine out of the 14 firms that sold shares last week prior to Brexit saw their shares end lower by 1 per cent to 10.7 per cent or an average of 4.3 per cent from their average sale prices. Among the top performers last week are directors of Glory Flame Holdings and China ITS Holdings with their shares closing 10.7 per cent and 8.9 per cent, respectively, below the directors’ average sale prices last week.

Blue chip property developer Sino Land picked up where it left off in January with 1 million shares purchased on June 24 at HK$11.52 to HK$11.94 each or an average of HK$11.66 each. The trade was made after the stock fell by as much as 7.5 per cent from HK$12.46 on June 7. Although the group resumed buying back following the fall in the share price this month, the repurchase was made at higher than its acquisition price earlier this year based on the 1.76 million shares that the company acquired from January 8 to 11 at an average of HK$10.44 each. Prior to the buybacks this year, the group acquired 2.57 million shares from April to July 2015 at an average of HK$12.38 each, 436 million shares from April 2000 to December 2014 at HK$1.95 to HK$24.45 each or an average of HK$9.74 each and 85.7 million shares from January 1995 to August 1998 at HK$7.91 to HK$1.98 each or an average of HK$4.71 each.

Another positive this year is Chairman Robert Ng Chee Siong, who purchased 200,000 shares on April 14 at HK$12.70 each and a further 180,000 shares on May 13 at HK$11.10 each. The trades increased his holdings to 3.319 billion shares or 53.83 per cent of the issued capital. Prior to his trades this year, the Chairman acquired 3.6 million shares from February to November 2015 at an average of HK$11.67 each, 3.34 million shares from April 2013 to December 2014 at an average of HK$12.41 each and 1.07 million shares in September 2011 at HK$12.24 each. The stock closed at HK$11.92 on Friday.

Glory Flame Holdings Chairman and Chief Executive Pei Wing Fu unloaded more shares of the concrete demolition services provider at sharply lower than his previous sale prices with 6 million shares sold on June 16 at 75 Hong Kong cents each. The trade reduced his holdings by 9 per cent to 64.004 million shares or 9.01 per cent of the issued capital. He previously sold 13.7 million shares in May and 47.8 million shares in January at HK$1.15 to HK$1.00 each or an average of HK$1.08 each. Prior to his sales this year, the chairman sold 9 million shares in November 2015 at 98 Hong Kong cents each and 105 million shares from May to October 2015 at HK$2.39 to HK$1.57 each or an average of HK$1.83 each. The disposals by Pei since May 2015 are the first corporate shareholder trades in the company since the stock was listed (by way of placing) in August 2014. The chairman’s sale prices were higher than the listing price of 40 Hong Kong cents. The counter has continued to fall, closing lower from the Chairman’s last sale price to 67 Hong Kong cents on Friday.

Robert Halili is managing director of Asia Insider