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HomeBanking & FinanceHong Kong stock buy-backs nearing US$10 billion can’t halt market slide

Hong Kong stock buy-backs nearing US$10 billion can’t halt market slide

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Cheap and cheaper: stock buy-backs approaching US$10 billion fail to stem losses in Hong Kong market

Hong Kong-listed companies are using up their cash reserves on stock buy-backs, while valuations get cheaperBuy-backs in the city could reach HK$92.9 billion (US$11.7 billion) in 2023 at current pace, versus HK$104.9 billion in 2022, Hang Seng compiler saysHong Kong stock marketMia CastagnonePublished: 7:37pm, 19 Sep, 2023Why you can trust SCMP

Hong Kong-listed companies are splashing cash reserves to buy back their own stocks as valuations declined. Yet, these purchases have failed to stop the broader market from sliding again this year.The amount of buy-backs reached HK$73.5 billion (US$9.4 billion) this year through September 15, or 70 per cent of the HK$104.9 billion outlays in 2022, according to Hang Seng Indexes Company, the city’s benchmark index compiler. At this pace, annual repurchases could reach HK$92.9 billion in 2023, or 3.9 times the five-year average, it added.

The Hang Seng Composite Index, the broadest gauge which covers 95 per cent of the city’s market capitalisation, has declined 7.6 per cent this year. Last year, the index slumped 18 per cent despite a 175 per cent surge in corporate buy-backs.

“Corporate buy-backs are high precisely due to low market support levels,” said Brock Silvers, chief investment officer at Kaiyuan Capital in Hong Kong. “Companies don’t see growth or investment opportunities as more attractive than their own beaten-down stocks.”

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