New Policy Prompts Chinese Firms to Issue Fresh Share Buyback Plans
Liao Shumin
/SOURCE : Yicai
New Policy Prompts Chinese Firms to Issue Fresh Share Buyback Plans

(Yicai Global) Nov. 12 -- At least three companies listed in China have announced share buyback plans after the government unveiled a new policy to support repurchases at the end of last week.

The China Securities Regulatory Commission, Ministry of Finance and State-owned Assets Supervision and Administration Commission jointly released a policy document on supporting buyback schemes. It broadens the source of repurchase funds and simplifies the implementation process.

Among the companies to immediately announce buyback plans were Wuxi Honghui New Materials Technology, Jiangxi Fushine Pharmaceutical and smart city service provider Wonders Information.

Buybacks aim at removing some of a company's outstanding stock from the secondary market, thereby buoying the price. Firms have been increasingly turning to the practice during this year's slump in Chinese equities. Some 557 A-share companies had carried out buybacks as of Nov. 9, totaling a record 4.1 billion shares at a cost of CNY34.3 billion, according to Securities Times.

Honghui New Materials will draw on its own funds to repurchase stock through call auction at CNY35 (USD5) a share, it said, valuing the firm at between CNY30 million (USD4.3 million) and CNY60 million. Its shares [SHE:002802]climbed 5.5 percent today to CNY20.9.

Jiangxi Fushine Pharmaceutical will also use its own money, paying CNY20 for each share through a public centralized transaction. It aims for a valuation of no less than CNY100 million and no more than CNY200 million. The company [SHE:300497] gained 1.7 percent to close at CNY16.97.

Wonders Information [SHE:300168] surged by the daily 10 percent trading limit to CNY12.90 after saying it would pay CNY16 a share for a market cap of between CNY300 million and CNY600 million.

With strong policy support, listed firms are looking increasingly to share repurchases, according to the Securities Times. Based on the upper end of the targeted valuations the repurchase figure could hit CNY125.7 billion (USD18 billion).

Other firms already making arrangements include battery manufacturer Shenzhen Center Power Tech, auto parts-to-internet games developer Zhejiang Century Huatong Group and printing equipment maker Masterwork Group.

Shareholders have approved Shenzhen Center Power's plan, while Zhejiang Century Huatong flagged initial plans in which the company said it would spend CNY213 million for 10.8 million shares through call auction on Nov. 9.

On Nov. 11, Masterwork re-labeled the purpose of its buyback to "intended for equity incentive" from "cancellation," as the government's policy document encourages listed firms to repurchase in line with the law for share incentives and employee stock ownership plans.

Shares repurchased in the four years to 2017 cost CNY9.2 billion, CNY10.9 billion, CNY50.3 billion and CNY9.9 billion, respectively. The total was on a par with this year's figure. Only 2016 exceeded the CNY10 billion mark.

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Keywords: LISTED COMPANIES , Share Buybacks , Regulators