Chinese firms to boost buying their own shares on $1.6-trillion slump in its stock market
Shanghai — A wave of Chinese companies are promising to boost buying of their own shares as a $1.6-trillion slump in the nation’s stock market deepens.
At least 101 firms said major shareholders and executives plan to increase their stakes or have bought shares, according to exchange filings on Wednesday and Thursday. Stock prices for these companies dropped by an average 7% on Tuesday when the Shanghai benchmark plunged to a two-year low amid concern about worsening trade tensions with the US.
The move is reminiscent of steps taken by Chinese firms during 2015 when executives scrambled to shore up confidence as a stock bubble burst. Officials are weighing in: People’s Bank of China governor Yi Gang pledged after Tuesday’s tumble to use monetary policy comprehensively and maintain liquidity at an appropriate and stable level, while state media also tried to reassure investors.
"The purchases are more of a symbolic move to boost share prices," said Guo Feng, Shanghai-based head of the wealth management department at Northeast Securities. "It’s typical for firms to come up with such plans after market tumbles, but they hadn’t always worked."
Property developer Guangzhou Yuetai Group’s chairman plans to buy up to 1-billion yuan ($154m) of the company’s shares over the next nine months starting from Thursday, according to a statement dated Thursday. The stock plunged by the 10% daily limit for a third day. Guangzhou Haige Communications Group said on Wednesday that its controlling shareholder plans to spend no more than 1-billion yuan, buying as much as 5% of total shares before August 10.
Of the 101 companies announcing buybacks, 61 are listed in the southern city of Shenzhen, where the benchmark equity gauge has slumped nearly 20% since its January high. This includes a 2.1% drop on Thursday. The Shanghai Composite fell 1.4% to a fresh two-year low. A weaker yuan is adding to jitters, with the currency losing 1.6% in the past week.
With assistance from Penny Peng