--- title: "What to watch in a bear market? Share buybacks!" description: "Recently, Chinese stocks and China concept stocks seem to have lost market favor again, turning downward. The Hong Kong Hang Seng Index fell below 18,000 points, while the Nasdaq Golden Dragon China I" type: "topic" locale: "en" url: "https://longbridge.com/en/topics/22046382.md" published_at: "2024-06-25T02:49:39.000Z" author: "[财华社](https://longbridge.com/en/profiles/11651030)" --- # What to watch in a bear market? Share buybacks! Recently, Chinese stocks and China concept stocks seem to have fallen out of favor with the market again, turning downward. The Hang Seng Index has fallen below the 18,000-point mark, while the Nasdaq Golden Dragon China Index, which reflects the performance of China concept stocks, has underperformed the Nasdaq Index led by Nvidia almost every day in the past two weeks. This market situation harbors both risks and opportunities: capital outflows may expose risks for some listed companies with weak financial fundamentals, but on the other hand, the decline also makes valuations of some fundamentally sound listed companies more attractive. When evaluating the overall performance of listed companies, in addition to in-depth research into their financial reports, the potential impact of macroeconomic conditions, and related industry information, there is also a quick and accurate method worth referencing—paying attention to the company's share buyback activities. The direct impact of buybacks is that they significantly increase buying pressure for shares in the short term, thereby providing strong support for stock prices by adjusting the supply-demand relationship in the short-term market. From the perspective of existing shareholders, when market value is undervalued, listed companies use idle cash to repurchase shares and cancel them, aiming to enhance the equity of existing shareholders. Additionally, when listed companies have not yet identified more ideal business opportunities, choosing to use funds for low-price share buybacks not only helps with efficient capital utilization but also significantly reduces the risk of management misusing company funds. Caijing Media found that in the current weak environment of the Hong Kong stock market and China concept stocks, insurance companies and tech companies have become the main forces in the buyback market. **Insurance Companies Love Buybacks** Listed insurance companies provide protection services to customers as part of their business. As professional financial institutions, they also know how to prepare for rainy days—increasing buybacks when financial conditions permit during high-risk periods to protect themselves. International financial services company$PRU(02378.HK) recently announced a $2 billion share buyback plan, equivalent to approximately HKD 156.14 billion, representing 7.68% of Prudential's current market value of HKD 2,032.01 billion (based on HKD 73.90 per share). The plan will be completed no later than mid-2026. Prudential stated that it aims to maintain a free surplus ratio between 175% and 200% during operations. At the end of 2023, Prudential's free surplus ratio was 242%. Therefore, after declaring the second interim dividend for 2023, the company decided to return $2 billion to shareholders. Notably, Prudential will maintain its dividend policy unchanged while conducting buybacks, with an expected annual dividend increase of 7%-9% in 2024. For the fiscal year ended December 31, 2023, Prudential's total annual dividend was 20.47 cents, equivalent to approximately HKD 1.60, a 9% year-on-year increase. Based on the current price of HKD 73.90, the dividend yield is 2.17%. Including the share buyback, the total return to shareholders amounts to 9.85% of its current market value, which is quite generous. Prudential's management stated that the company performed well in the first half of 2023 and is confident in achieving new business growth for the full year of 2024 and meeting its financial and strategic goals by 2027. In Q1 2024, Prudential's new business profit grew by 11% to $810 million, while annual premium equivalent sales increased by 7% to $1.625 billion. Management expects Q2 annual premium equivalent sales trends to be similar to Q1. Prudential's peer AIA (01299.HK) is also a "loyal supporter" of buybacks. When announcing its Q1 2024 results, AIA added $2 billion to its existing $10 billion share buyback plan, bringing the total to $12 billion, equivalent to approximately HKD 936.82 billion, or 15.12% of its current market value of HKD 6,193.83 billion (based on HKD 55.30 per share). The extended buyback plan will conclude no later than April 30, 2025. AIA's total annual dividend for 2023 was $2.3 billion, equivalent to approximately HKD 179.56 billion, or 2.90% of its market value. In Q1 2024, AIA's new business value grew by 31% to $1.327 billion, a quarterly record, with the new business value margin rising to 54.2%. AIA stated that it aims to distribute 75% of its annual free surplus net amount as dividends and share buybacks to shareholders starting from the full-year 2024 results. In 2023, AIA generated a free surplus net amount of $3.9 billion, meaning the distributable amount to shareholders reached $2.9 billion, equivalent to approximately HKD 226.40 billion, or 3.66% of its market value. Clearly, insurance companies have adopted a strategy of converting annual surpluses into profit returns for shareholders. In a weak stock market environment, increasing buybacks allows insurance companies to repurchase more shares at a lower cost, maximizing the equity of existing shareholders. **Hong Kong Tech Giants Love Buybacks Even More!** Apart from defensive insurance companies, offensive tech giants are also frequent participants in buybacks. According to Wind data, the Hong Kong-listed company with the most buybacks this year is$TENCENT(00700.HK), which has repurchased 141 million shares so far, totaling HKD 47.334 billion. Caijing Media calculated that the average repurchase price may be HKD 334.61, representing an 11.34% discount to the current price of HKD 377.40. Additionally, Meituan (03690.HK), Xiaomi (01810.HK), and Kuaishou (01024.HK) are also major players in buybacks, with total repurchase amounts this year reaching HKD 11.947 billion, HKD 2.664 billion, and HKD 1.897 billion, respectively. In June this year, Meituan announced that it would repurchase B-class ordinary shares in the open market from time to time, with a total amount not exceeding $2 billion, equivalent to approximately HKD 15.614 billion, or 2.20% of its current market value of HKD 708.468 billion (based on HKD 114.20 per share). After experiencing rapid growth and reducing losses from new business transformations, this marks Meituan's first buyback initiative. Kuaishou also announced a new share buyback plan in June this year, proposing to repurchase B-class shares worth up to HKD 16 billion over the next 36 months, equivalent to 7.86% of its current market value of HKD 203.433 billion (based on HKD 46.90 per share). Xiaomi, which started selling cars this year despite high costs, has not given up on share buybacks and has consistently ranked among the top 10 in Hong Kong's buyback list in recent years. This year, Xiaomi has repurchased a total of 187 million shares, equivalent to 0.75% of its existing issued shares, with a total repurchase amount of HKD 2.664 billion. However, in terms of buyback scale, none of the listed companies on the list can compare with$BABA-W(09988.HK) . **Alibaba Is the Most Active in Buybacks** $Alibaba(BABA.US) , as a company listed in both Hong Kong and the U.S., focuses its buyback activities primarily on the U.S. stock market, so its buyback data is relatively less recorded in the Hong Kong market. For the fiscal year ended March 31, 2024, Alibaba repurchased a total of 1.249 billion ordinary shares (equivalent to 156 million American depositary shares) for a total of $12.5 billion, equivalent to approximately HKD 975.85 billion, or 7.02% of its current U.S. market value of $178.148 billion (based on approximately $73.67 per American depositary share). In addition to buybacks, Alibaba has also actively paid dividends. For the fiscal year ended March 2024, it declared a cash dividend of $0.125 per share or $1.00 per American depositary share. Furthermore, Alibaba will distribute financial gains from exiting non-core asset investments to shareholders as special dividends. For fiscal year 2024, Alibaba declared a one-time special cash dividend of $0.0825 per share (or $0.66 per American depositary share). Combined, the total dividends for fiscal year 2024 may reach $4 billion, plus the $12.5 billion share buyback plan, bringing the total return to shareholders to $16.5 billion, equivalent to 9.26% of its U.S. market value. **Summary** In a sluggish stock market environment, listed companies' buyback actions not only bring actual returns to shareholders but also send positive signals to the market, serving as a guiding light that fully demonstrates the robustness and efficiency of corporate governance. By observing such behaviors of listed companies, investors may more accurately assess their fundamentals and identify high-potential investment targets. **By: Mao Ting** ### Related Stocks - [PGJ.US - Invesco Golden Dragon China](https://longbridge.com/en/quote/PGJ.US.md) - [00HSI.HK - Hang Seng Index](https://longbridge.com/en/quote/00HSI.HK.md) - [07500.HK - FI2 CSOP HSI](https://longbridge.com/en/quote/07500.HK.md) - [02378.HK - PRU](https://longbridge.com/en/quote/02378.HK.md) - [K6S.SG - Prudential USD](https://longbridge.com/en/quote/K6S.SG.md) - [PUK.US - Prudential](https://longbridge.com/en/quote/PUK.US.md) - [00700.HK - TENCENT](https://longbridge.com/en/quote/00700.HK.md) - [80700.HK - TENCENT-R](https://longbridge.com/en/quote/80700.HK.md) - [TCEHY.US - Tencent](https://longbridge.com/en/quote/TCEHY.US.md) - [TCTZF.US - Tencent Holdings Limited](https://longbridge.com/en/quote/TCTZF.US.md) --- > **Disclaimer**: This article is for reference only and does not constitute any investment advice.