A-Share Buybacks Surge: Market Cap Mgmt & Cancellation Rise

Under the encouragement of regulatory authorities, the repurchase of A-shares by listed companies continues to heat up.

On the evening of September 10th, several listed companies, including WuXi AppTec, announced their repurchase plans.

Notably, this is WuXi AppTec's third A-share cancellation repurchase plan of 1 billion yuan this year.

According to Wind data statistics, as of September 11th, 1,424 listed companies have completed repurchase plans this year.

Among them, large-scale repurchases exceeding 1 billion yuan are frequently seen, and the proportion of market value management and cancellation repurchase has also increased.

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Interviewees believe that the increase in the proportion of market value management and cancellation repurchase is conducive to enhancing the company's value and stock price, strengthening investor confidence, optimizing capital structure, and promoting the activity and stability of the stock market.

The repurchase continues to heat up according to WuXi AppTec's "Repurchase Report on the Third Time of A-shares by Concentrated Bidding Trading Method in 2024", it plans to repurchase A-shares with its own funds of 1 billion yuan for cancellation, in order to maintain the company's value and shareholder rights, and enhance investor confidence.

WuXi AppTec has already issued the third A-share cancellation repurchase plan of 1 billion yuan this year.

Prior to this, WuXi AppTec completed the first two repurchase plans in February and May this year, with a total repurchase of 2 billion yuan of A-shares.

According to Wind data statistics, as of September 11th, there have been 4,550 new repurchase plans this year, involving 1,803 listed companies.

At the same time, 1,424 listed companies have completed repurchase plans this year, far exceeding the whole year of 2023 (1,196 listed companies completed repurchase).

The reporter also noticed that "large-scale" repurchase is one of the important characteristics of the repurchase of A-shares by listed companies this year.

Wind data shows that more than 10 listed companies such as Hikvision, WuXi AppTec, Sanan Optoelectronics, CATL, Tongwei Shares, Baosteel Shares, SF Holding, Kailai Ying, Jiu'an Medical, Hebang Bio, and Will Semiconductor have repurchase amounts exceeding 1 billion yuan this year.

The market repurchase continues to heat up, what is happening?

"There are many factors behind the heating up of the repurchase."

Financial commentator Zhang Xuefeng analyzed that the first is the undervaluation of stock prices.

When the company's stock price is considered to be below its intrinsic value, companies usually maintain shareholder interests through repurchases, increase the support for stock prices, and enhance market confidence; the second is sufficient funds.

Many listed companies, especially those with large market value, have accumulated a large amount of cash flow in recent years.

When there are no better investment opportunities, repurchasing stocks has become an effective way to use funds; the third is the market's low response.

When the overall market performance is not good, repurchase can be seen as a market stabilization strategy, enhancing investor confidence and avoiding excessive stock price declines.

The proportion of cancellation is high, and the proportion of market value management and cancellation repurchase has also increased this year, with the proportion of cancellation slightly winning.

According to Wind data statistics, as of September 11th, among the 1,424 listed companies that have completed repurchase plans this year, 593 companies have repurchase cancellation as the purpose, and 168 companies have market value management as the purpose.

Compared with last year, a total of 723 companies completed the repurchase with the purpose of repurchase cancellation in 2023, and only 55 companies completed the repurchase with the purpose of market value management.

He Li, the fund manager of Zhi Zhi Shang Investment Fund, analyzed that this year, the A-share market has shown a clear trend of increasing the proportion of market value management and cancellation repurchase.

On the one hand, this is due to the new "Nine Articles" of the capital market promulgated by the State Council, which has guided the market to strengthen investor protection and highlight shareholder returns, and high-quality listed companies have also actively responded.

On the other hand, the valuation of A-shares is relatively low, and listed companies actively maintain their own stock prices, releasing a signal that the overall market is favorable and the valuation is at the bottom of the range.

So, what is the difference between market value management and cancellation repurchase?

Zhang Xuefeng explained that market value management repurchase refers to the company's repurchase of shares to maintain the company's stock price, enhance market confidence in the enterprise, and avoid a significant decline in stock prices during market fluctuations or low stock prices.

Market value management repurchases generally do not immediately destroy the repurchased stocks, but treat them as treasury shares, which may be used for employee incentives, sales, and other purposes in the future.

Sun Enxiang, the person in charge of the wealth management division of Paipai Network, said that market value management is a strategic management behavior, aiming to maximize the company's value through a variety of scientific and compliant methods and means.

The core lies in optimizing the company's intrinsic value and external value, thereby increasing the company's market value.

Regarding the cancellation repurchase, Zhang Xuefeng said that this refers to the company's repurchase of shares, and then canceling these stocks, thereby reducing the company's total share capital.

By canceling the circulating shares, the per-share equity of the company's shareholders increases, which can usually enhance the per-share profit indicator, thereby increasing shareholder value.

Overall, market value management and cancellation repurchase both play an important role in enhancing the company's value and shareholder returns.

Sun Enxiang pointed out that "in recent years, the proportion of market value management and cancellation repurchase has increased, which is conducive to enhancing the company's value and stock price, strengthening investor confidence, optimizing capital structure, and promoting the activity and stability of the stock market."