2016 a record breaking year for buybacks by Hong Kong listed firms
It was a record breaking year for buybacks in the Hong Kong stock market in 2016 as firms bought back the most shares in terms of value since 1992. A total of 158 companies recorded 3,054 filings worth HK$41.78 billion in 2016. The turnover last year was 78 per cent more than the previous high of HK$23.54 billion in 2015. The number of companies and filings last year were also the third and second highest yearly totals, respectively, since 1992.
To show just how active companies were in 2016, the buyback totals were higher than the yearly averages of 126 firms, 2,101 filings and HK$11.66 billion from 2008 to 2015. Historically, the buybacks last year were significantly higher than the yearly averages of 100 companies, 1,652 filings and HK$7.267 billion from 1992 to 2015. The most active month in 2016 was January with 79 companies that recorded 526 filings worth HK$4.326 billion. The figures were higher than the monthly averages of 38 firms, 230 filings and $3.4 billion from February to December.
Firms that repurchased shares in 2016 fared well with 90 out of 158 companies posting higher year-end prices from their buyback prices with an average gain of 21 per cent. Meanwhile, 51 companies saw their share prices end the year below their average buyback prices with an average fall of 18 per cent. Investors should note that the buyback performance in Hong Kong was significantly better than the firms that repurchased shares in the Singapore market where companies that recorded price falls in the Lion State outnumbered gainers 48 to 46.
The top buyer in terms of value in the Hong Kong market last year was global banking giant HSBC Holdings with 325.3 million shares purchased worth HK$19.4 billion. The group bought back shares in five separate months from August to December (via the London Stock Exchange) at HK$52.92 to as high as HK$66.50 each. The heavy repurchases were not surprising as the group announced it would buy back HK$19.5 billion worth of shares in the second half of 2016. The blue chip closed 4 per cent up from its average buyback price to HK$62.25 in 2016.
The second top buyer in 2016 was mainland property developer Country Garden Holdings with a whopping 1.08 billion shares purchased worth HK$4.06 billion. The group bought shares in 11 separate months at HK$2.85 to HK$4.48 each or an average of HK$3.75 each. The company was also one of the most active last year with 136 filing days recorded in 2016. The consistent and heavy buybacks have paid off as the stock closed 16 per cent up from the group’s average buyback price to HK$4.34 in 2016.
The bulk of the companies that recorded the most buybacks in terms of number of filings and months saw their share prices end higher from their average buyback prices with eight out of the top 10 companies posting gains with an average increase of 13 per cent. The most active in terms of number of filings was filaments yarn manufacturer Billion Industrial Holdings with 181 filing days recorded in 2016. The group acquired 23.8 million shares in 11 separate months at HK$4.18 to HK$5.43 each or an average of HK$4.70.
Interestingly, the company bought back very quietly last year with an average of only 132,000 shares repurchased per day. The persistent buybacks have paid off as the stock closed 19 per cent higher from the company’s average buyback price to HK$5.60 in 2016.
Also on the top 10 buybacks list is water supply operator and sewage treatment firm China Water Affairs Group with 111 filings recorded in 2106. The group repurchased 26.6 million shares in eight separate months from April to December at HK$3.37 to HK$5.92 each or an average of HK$4.55 each. The buybacks from April to December last year were the company’s first buybacks since May 2014. The counter closed 11 per cent up from the group’s average buyback price to HK$5.07 in 2016.
Another active company last year was hotel and casino operator Macau Legend Development with buybacks recorded in 10 separate months from January to November. The group repurchased 99.2 million shares at HK$0.94 to HK$1.61 each or an average of HK$1.05 each. The company recorded 52 filings during that 10-month period. The stock closed 49 per cent up from the group’s average buyback price to HK$1.57 in 2016.
Another interesting buyback statistic in 2016 is the percentage differential between the lowest and highest buyback prices by a company. Huge differentials indicate a company’s determination to support its share price on the way down or confidence in continuing to buy back at higher prices.
The company with the largest low price/high price differential was property developer and investor Chuang’s Consortium International with buybacks recorded from January to September at HK$0.85 to HK$1.80 each, a difference of 112 per cent. The group acquired a total 61.1 million shares in seven separate months at an average of HK$1.11 each. The shares bought by the company last year accounted for 10 per cent of the stock’s trading volume in 2016. The counter closed 31 per cent up from the group’s average buyback price of HK$1.11 to HK$1.45 in 2016.
On the flip side, video game developer Feiyu Technology International continued to buy back last year at progressively lower prices with 23.15 million shares purchased in seven separate months at HK$1.98 to HK$1.22 each or an average of HK$1.53 each. The persistent buybacks by the group failed to stem the fall in the share price as the stock closed lower from its average buyback price to HK$1.15 in 2016.
Six out of the top 10 gainers in 2016 bought back shares only in the month of January. Among those stocks was freight and logistics services provider On Time Logistics Holdings with the group picking up 1.76 million shares in January at an average of HK$1.15 each. The stock closed 161 per cent up from its average buyback price to HK$2.99 in 2016.
Another top performer that bought shares solely in January was liquid crystal displays manufacturer Yeebo International Holdings. The group repurchased 2.9 million shares from January 4 to 8 at an average of HK$1.82 each. The counter closed 148 per cent up from the company’s average buyback price to HK$4.52 in 2016.
The worst performer in 2016 was sanitary ware products developer and distributor Bolina Holding with 13.7 million shares purchased from January to February at an average of HK$1.83 each. The counter plunged at the end of September to below 40 cents per share on news of a possible forced sale of shares that were pledged by controlling shareholder and chairman Xiao Zhiyong to a mainland securities firm. The sale materialised on October 20 with the subsequent sale of 283.6 million shares or 28.5 per cent of the issued capital. The shares of Bolina closed 78 per cent below the group’s average buyback price to HK$0.40 in 2016.
Robert Halili is managing director of Asia Insider