Recently, some listed companies have played the “repurchase card” to enhance the confidence of investors and encourage employees. According to the statistics of the reporter of Securities Daily, as of February 10 this year, 228 A-share companies have announced the progress of repurchase by centralized bidding, with a total amount of 5.05 billion yuan. Of the 29 new companies this year, 27 repurchased shares for employee stock ownership plans or equity incentives, and 2 for cancellation and reduction of registered capital.
From the perspective of industry, the repurchase amount of Companies in the three industries of medicine, biology, power equipment and electronics is relatively high. According to the 2021 annual report and performance forecast, there were also a large number of performance prediction companies in these three industries last year. Market participants said that under the condition of stable and sufficient cash flow, such companies have a high willingness to enhance the enthusiasm of employees by repurchasing shares for equity incentive. Looking forward to the whole year, A-Shares are expected to get out of the structured market. It is expected that undervalued high-quality companies will have high repurchase enthusiasm.
repurchase amount and performance are almost “the same frequency”
“Since the beginning of this year, A-Shares have undergone a substantial adjustment. The main significance of repurchase by listed companies at this time point is to stabilize investor confidence, boost stock prices and play a certain role of ‘stabilizer’ during the adjustment of market fluctuations.” Chen Li, chief economist of Chuancai securities and director of the Research Institute, said in an interview with reporters that at the same time, investors should pay attention that the final decision of the company’s share price should be the company’s performance. Investment decisions need to be based on the company’s fundamental information, and there is no need to overreact to news changes such as share repurchase.
The share repurchase rules of listed companies (hereinafter referred to as the repurchase rules) issued by the CSRC on January 7 shows that listed companies should announce the repurchase progress as of the end of last month within the first three trading days of each month, that is, as of February 9, all listed companies implementing repurchase need to disclose the implementation of repurchase in January this year.
Since this year, 228 companies have released the progress of repurchase through centralized bidding transaction, of which 44 have completed the implementation, 182 are in the process of implementation, and the other two have terminated the repurchase.
In terms of the repurchase amount, the repurchase amount in the pharmaceutical, biological, power equipment and electronic industries during the year was higher, which were 1.181 billion yuan, 641 million yuan and 424 million yuan respectively. From the perspective of a single company, the repurchase amount of 11 companies in the year exceeded 100 million yuan, of which the repurchase amount of Tianjin Zhonghuan Semiconductor Co.Ltd(002129) , Changchun High And New Technology Industries (Group) Inc(000661) and Zhejiang Zheneng Electric Power Co.Ltd(600023) exceeded 300 million yuan.
The reporter noted that in industries with high repurchase amount, the number of performance prediction companies in 2021 is also high. At present, the disclosure of 2021 annual report of listed companies is in progress. According to statistics, as of February 10, 139 companies have disclosed the performance of 2021 annual report. In addition, 2523 companies have disclosed the performance forecast of 2021. From the performance forecast and annual report data, the performance of Companies in the four industries of chemical industry, mechanical equipment, medicine, biology and electronics has increased and the number of anticipations is large.
several companies raised the upper limit of repurchase price
From the perspective of the implementation progress of the repurchase plan, the reporter noted that since this year, due to the company’s share price exceeding the repurchase price ceiling, listed companies such as Jingjin equipment, Zhejiang Shengyang Science And Technology Co.Ltd(603703) , Nanning Baling Technology Co.Ltd(002592) have raised the repurchase price ceiling and continued to implement the repurchase, and some companies have added the repurchase amount and raised the repurchase amount ceiling.
Referring to this phenomenon, Bank Of China Limited(601988) postdoctoral Wang Huiqing said in an interview with the reporter of Securities Daily that theoretically, the implementation of repurchase by listed companies and the increase of repurchase price and amount can release a signal of sufficient confidence in the profitability and development prospects of enterprises to the market. This is a common method for listed companies to stabilize their stock prices during market shocks, which can enhance market confidence to a certain extent, but also help to safeguard the interests of investors and reduce the company’s operating risks.
However, some companies terminate the repurchase plan because the closing price of their shares is higher than the upper limit of the repurchase price, or the repurchase amount does not reach the lower limit at the expiration of the repurchase period. The reporter noted that the repurchase rules put forward specific requirements for “repurchase of shares by means of centralized competitive trading”. After the disclosure of the share repurchase plan of listed companies, it shall not be changed or terminated without sufficient and legitimate reasons.
Wang Huiqing said that by making targeted regulations on possible violations in the repurchase process, the repurchase rules not only reduced the living space of “impure motivation” repurchase behavior, but also correspondingly reduced the restrictions on “defensive” repurchase. This not only releases the signal that regulators encourage and support listed companies to carry out stock repurchase, but also guides listed companies to formulate reasonable repurchase plans, improve the internal governance structure of the company and boost investor confidence.
“The promulgation of the repurchase rules is a positive urging effect on the share repurchase of listed companies to ensure that the repurchase behavior of listed companies is legal and compliant.” Chen Li said that by limiting the repurchase situation, regulators avoided listed companies from participating in insider trading. Taking centralized bidding repurchase as an example, the company shall not declare at the price limited by the rise and fall of the transaction on that day, which means that the company’s repurchase will not affect the closure of the rise and fall limit, and limit the impact of the company’s repurchase on the stock price market to a certain range.
Looking forward to 2022, Chen Li believes that although the stock market is deeply affected by changes in overseas monetary policies this year, with the adjustment of China’s interest rate and reserve requirement reduction tools, the capital level is still reasonably abundant, and A-Shares are still expected to get out of the structural market. The sought after sectors will be further differentiated according to industries and segments, prompting some companies with undervalued valuations to take repurchase measures, manage their own funds and boost market confidence.
