Chinese internet giants, including Alibaba Group, Tencent, Meituan, Kuaishou, and Xiaomi, are engaging in record share buybacks in an effort to boost their market value amidst a stock rout in the second largest economy in the world. Alibaba announced a $12.5 billion share repurchase from US and Hong Kong markets, representing 5.1% of its outstanding shares in the fiscal year ended March 31. The company spent $4.8 billion in buybacks in the first quarter alone, marking the largest share repurchase by a Chinese tech company in the past year. The move comes as Chinese regulators have been encouraging listed companies to repurchase shares to stabilize market confidence in the face of significant losses in market value.
In an effort to stabilize their market value, Alibaba and other Chinese tech companies have ramped up their share buyback programs. Tencent spent a record 49 billion Hong Kong dollars on share repurchases in 2023, more than it had spent in the past decade. The company has pledged to at least double the size of its share repurchase in 2024. Alibaba raised its share buyback plan by an additional $25 billion through March 2027. Other Chinese companies, such as Meituan, Kuaishou, and Xiaomi, have also increased their share repurchases. In 2023, companies listed in Hong Kong spent 126 billion Hong Kong dollars on share buybacks, the highest on record, and firms listed in mainland China repurchased 120 billion yuan worth of stocks.
These efforts are a part of a larger campaign by Beijing to address challenges in the stock market and alleviate public concern. In February, the government injected money into stocks through the country’s sovereign wealth fund and replaced the head of its securities regulator. While these efforts have led to a rebound in the Shanghai and Hong Kong markets from recent lows in early February, investors remain concerned about China’s economic slowdown, debt levels, property market risks, demographic shifts, and global selling of Chinese assets driven by geopolitical tensions and regulatory uncertainties. Share buybacks can boost investor confidence by signaling management’s belief in the company’s future prospects and commitment, but their impact on reviving global investor confidence in Chinese stocks may be limited in isolation.
Despite the efforts to stabilize market value through share buybacks, broader market conditions, investor sentiment towards Chinese stocks, and the ability of companies like Alibaba and Tencent to execute growth strategies effectively will ultimately determine the long-term impact on share prices. While the share buyback programs signal confidence in future prospects and belief in the underlying value of the company’s shares, they may not be enough to address the challenges facing the Chinese economy and global investor confidence. As Chinese companies continue to repurchase shares at record levels, it remains to be seen how these efforts will impact the overall stability and performance of the Chinese stock market in the coming months and years.