Since the beginning of this year, the Hang Seng Index has made a marked correction. At a time when share prices are falling, Hong Kong companies have made big purchases, and the Hong Kong stock market has once again set off a wave of "buybacks".

According to Wind data, as of October 13, 211 listed companies in the Hong Kong stock market have implemented share repurchases so far this year, with a total amount of more than HK $72.8 billion, the highest since the repurchase data of Hong Kong stocks in 2002, and 1.9 times the total repurchase amount of HK $38 billion in 2021. In September, buybacks were the highest in all months of the year, accounting for more than 25 per cent of total buybacks so far.

A number of industry insiders told reporters that the rise of the buyback wave demonstrates the confidence of the company's management and is expected to boost market sentiment while stabilizing the share price, highlighting the medium-and long-term investment value of Hong Kong stocks.

Concentration of buyback subjectsBig buybacks occur frequently.

In this wave of buybacks, nine listed companies have repurchased more than HK $1 billion, accounting for 78% of the total buybacks. Among them, Tencent and AIA Group Limited are among the top two in the list of total buybacks of Hong Kong shares this year, with a total repurchase amount of HK $23.88 billion and HK $18.61 billion respectively, which is a big difference from HSBC Holdings PLC, who ranks third with the buyback amount of HK $3.5 billion.

At the same time, the repurchase volume of six companies, including XIAOMI Group, Great Wall Motor, CK Asset, Wuxi Biologics, Swire An and China Gas, also exceeded 1 billion Hong Kong dollars.

In addition to the huge amount of buybacks, the frequency of this repurchase is also quite intensive. Take Tencent, the king of Hong Kong stocks, as an example. As of 13 October, Tencent had bought back the company's shares 75 times this year, and he spent more than HK $600 million on repurchases for two consecutive trading days from 12 to 13 October. In addition, insurance giant AIA Group Limited also completed eight buybacks in October, with repurchases worth about HK $178 million for four consecutive days from October 11 to October 14.

Anxin Capital Management Global Investment Department told China Fund News that in this wave of buybacks, information technology represented by Tencent and optional consumer companies represented by Great Wall Motor are still actively buyback. The financial sector represented by AIA and HSBC has taken the lead with a buyback amount of HK $23 billion, while health care companies represented by Wuxi Biologics and JD Health have also significantly strengthened their buyback efforts compared with previous rounds. Behind the structural changes, it also reflects the changes in the judgment of relevant industrial companies on their own prospects.

Li Zhiwu, the growth fund manager of Chuangjin Hexin Hong Kong Stock Connect, told reporters that the remarkable feature of this wave of buybacks is that the main body of buybacks is more concentrated. Li Zhiwu pointed out that compared with other tools to stabilize stock prices (such as management shareholding, employee stock ownership plan, share incentive plan, etc.), buybacks of listed companies, due to large-scale financial support, are more conducive to repairing investor confidence and play a better role in market capitalization management, stock price stability, and employee incentives.

Science and network stocks continue to take the lead."three barrels of oil" sold for the first time

From an industry point of view, among the 10 listed companies with the highest repurchase amount this year, apart from Tencent taking the lead in buybacks and constantly adding more, XIAOMI Group is also very high in the rankings, while JD Health, who ranks 10th, has also reached HK $940 million.

As for whether the science and network share repurchase can lead the plate from the bottom region to the upward trend, Anxin Capital Management Global Investment Department believes that it still needs the cooperation of the fundamental dimension. It told reporters that the recent Hong Kong stock Internet leader in the performance period after the continuous buyback, from the policy marginal changes, capital structure, valuation point of view, has been concussion bottom.

Yin Lei, fund manager of the Golden Eagle Fund Equity Research Department, told reporters that the large-scale buyback of science and technology shares may be mainly because the valuation is at a historically low level. The overall recovery of science and technology stocks also needs to observe the pace of interest rate increases by the Federal Reserve, the Internet industry policy, the progress of Sino-US audit and regulatory cooperation, the expectation of domestic economic improvement and other factors.

In addition, it is worth noting that CNOOC Limited and China Petroleum & Chemical Corporation in the "three barrels of oil" have also newly joined the "buyback army." According to Wind data, CNOOC Limited repurchased the company's shares six times in September, and so far he has repurchased 44.829 million shares, totaling about 444 million Hong Kong dollars; China Petroleum & Chemical Corporation also bought back the company's shares five times in late September, repurchasing 55.414 million shares, totaling about 189 million Hong Kong dollars.

Anxin Capital Management Global Investment Department said that since the beginning of this year, the energy sector has benefited from supply-side factors such as the geopolitical crisis and insufficient capital expenditure under the global energy transformation, and oil prices have reversed this year. This has led to a substantial increase in the prosperity of the exploration and development sectors, such as three barrels of oil, and the stock price is also impressive in the Hong Kong stock market this year. However, since the second half of the year, with the marginal weakening expectations on the demand side, oil prices have shifted from unilateral rises to high shocks, and investment opportunities for related companies will also be weakened.

Yin Lei said that due to geopolitical conflicts, the relationship between energy supply and demand has become more tense, the center of energy price fluctuations has increased significantly, and the traditional energy sector represented by oil, gas and coal has been in a high demeanor so far this year. In the medium and long term, due to the lack of capital expenditure in the early stage, the shortage of energy supply and demand may last longer, while relevant enterprises actively buy back or increase the dividend ratio, driving the valuation system from cyclical stocks to value stocks.

The buyback wave may continue.Hong Kong stocks already have medium-and long-term allocation value.

Haitong's research report shows that Hong Kong stocks have experienced five rounds of repurchase since 2005. Historically, the market has often experienced a large decline and valuations have reached a relatively low level at the beginning of the buyback wave, but Hong Kong stocks tend to stabilize and recover after the buyback tide. In the medium to long term, both the Hang Seng Index and Hang Seng Technology can bring better investment returns after the end of the buyback wave, and the information technology sector performs best after the buyback wave.

Anxin Capital Management Global Investment Department believes that this wave of buybacks will continue. It said that after combing through the 205 companies that have repurchased so far this year, it found that the average repurchase price of 175 of them was still higher than their current level, indicating that the overall valuation of Hong Kong stocks is still much lower than the desired level of listed companies.

As for the short-term and medium-and long-term overall impact of this wave of Hong Kong stock buybacks on the Hong Kong stock market, Yin Lei said that in the short term, the Hong Kong stock market may still be affected by factors such as the Fed's aggressive expectation of raising interest rates, the continued escalation of the conflict between Russia and Ukraine, and trade frictions between China and the United States; in the medium to long term, it is likely that the Hong Kong stock market is already at the relative bottom, and the room for further downside may be limited.

Li Zhiwu is very optimistic about the future of Hong Kong stocks. He said that Hong Kong stocks have entered an extremely rare layout opportunity for long-term investors. The valuation of Hong Kong stocks is close to the historical extreme position, and the margin of safety is extremely high. from the perspective of historical experience, the future returns of this extreme position are considerable both in terms of odds and odds.

Li Zhiwu said that from a cyclical point of view, the bottom of the bear market is full of all kinds of bad luck, and the top of the bull market is jubilant, but the bad side will pass eventually, and the dawn will come eventually. As long as you have confidence in the Chinese economy, time is likely to be a friend.