Jason Liu, head of Chief Investment Office (CIO) Asia at Deutsche Bank International Private Bank, says continuous corrections of Chinese stock markets in the last 12 months have lowered their valuations well below long-term averages.
That appears an opportune time for Chinese companies to announce share buyback plans and these announcements have supported the Hang Seng Index — up to a point. “As of March 29, Hong Kong’s benchmark Hang Seng Index was up 19.1% since reaching a six-year low on March 15. Hong Kong’s Hang Seng Tech Index was up 32.7% since its March 15 low. As of March 29, A-share markets were up a relatively modest 3.8% on average from their recent mid-March lows,” Liu says.
“On the share buyback front, historical evidence shows that China’s equities tend to react positively to share buyback announcements, at least in the short-term, especially the Chinese American depositary receipt (ADR) group. US-listed Chinese equities have reacted more positively than H-shares and A-shares. From a sector perspective, communication, services and materials have historically delivered the most positive stock price moves post buyback announcements,” Liu adds.