Stock Liao information

— Basic knowledge of stocks|Introduction to basics of stocks|Stock learning|Basic knowledge of stocks
Mobile access:m.liaochihuo.com

Monarch Strategy: Repurchase will become a new variable affecting the A-share pricing framework

Release Time:2021-07-21 Topic:A-share pricing mechanism Reading:5 Navigation:Stock Liao information > Comprehensive > Monarch Strategy: Repurchase will become a new variable affecting the A-share pricing framework phone-reading

Guide

Under the system reform, repurchase will become a new variable. This paper studies the A-share repurchase through system comparison, theoretical research, and data analysis, and looks forward to the scale, rhythm, structure and new model of A-share repurchase.

Summary

System comparison: The A-share repurchase system has been relaxed, but it is still stricter than the US and Hong Kong stocks. The United States generally allows companies to repurchase the company’s stock, which is "permitted in principle, prohibited by exception." The A-share repurchase system is generally relatively cautious, and the strength of relevant regulations on Hong Kong stocks is somewhere between the two. The A-share repurchase system has gradually made up for deficiencies and continuously improved in the course of reform and development. In October 2018, my country made special amendments to the provisions of the Company Law concerning the repurchase of company shares, increased the share repurchase situation, improved the decision-making procedure, extended the holding period of repurchased shares and added some requirements for repurchase shares. In January 2019, the Shanghai and Shenzhen Stock Exchanges respectively issued the "Implementation Rules for the Repurchase of Shares by Listed Companies", which means that the reform of this round of repurchase system will be implemented and its impact will gradually appear.

Theoretical research: repurchase motivation and repurchase effect. Foreign stock repurchase motivation research mainly formed the signal hypothesis, excess capital hypothesis, financial leverage hypothesis and other repurchase motivation theories. The research on the motivation of stock repurchase in my country started relatively late. The motivation of early stock repurchase was mainly to improve the situation of "one share dominance". At present, the signal hypothesis has been generally recognized and verified in the Chinese market. In terms of research on repurchase effects, A-share and U.S. stock repurchases have a positive effect on stock prices. Most of the existing research on the US stock market supports stock repurchase announcement, and listed companies can often obtain cumulative excess returns. The Chinese stock market has a positive response to the company's announcement of stock repurchase. After the announcement, the cumulative excess return rate is significantly positive, but there is a phenomenon of information leakage before the announcement.

Data analysis: Compared with U.S. stocks, A-share repurchase is more similar to Hong Kong stocks. U.S. stock repurchases have a large pro-cyclical scale, and A-shares Hong Kong stock repurchase counter-cyclical scale is small. The bottom interval of Hong Kong stocks is within 4 months. From 2012 to 2017, A-share repurchase has developed, but it has been relatively slow. In 2018, the A-share repurchase system was reformed and the repurchase scale was significantly increased to 73.5 billion yuan. The average repurchase/market value and the average repurchase/repurchase net profit were 0.15% and 1.99%, respectively, which exceeded the 0.08% and 0.08% of the Hong Kong stocks in the same period. 0.46%, but still lower than the 2.71% and 53.07% of the S&P 500. The difference in the characteristics of the repurchase of A-share Hong Kong stocks and U.S. stocks is due to the fact that the repurchase of A-shares Hong Kong stocks is mainly based on sending signals of underestimation, which boosts the stock price during the market down phase and uses the repurchase as an emergency measure; while the U.S. stock repurchase is for improvement. Capital efficiency and optimization of financial leverage, enhance corporate value, and use financial flexibility to avoid taxation as the main means of corporate return to shareholders.

Repurchase outlook: A-share repurchase will enter the new market in 2019At this stage, the direct participation of listed companies in transactions will affect the A-share pricing framework, and the linkage between the fundamentals of listed companies and stock prices will increase. It is estimated that the repurchase scale in 2019 will be between 63.1 billion yuan and 218.8 billion yuan, and the absolute returns will be the best 15 trading days after the announcement of the repurchase plan. Industries with more downstream private enterprises, such as home appliances, media, and computers, are more willing to buy back. Repurchase +convertible bonds has five major advantages for listed companies, and it may become an important model for boosting stock prices and refinancing. In 2019, the allocation value of convertible bonds is highlighted, and the fund end supports the repurchase + convertible bond model. At present, listed companies have issued repurchase + convertible bond plans, waiting for specific cases to land. Focus on grasping A-share listed companies that may link convertible bonds and repurchase.

Risk warning: Repurchase-related policy adjustments, drastic changes in the market environment, listed companies’ profits have fallen sharply, listed companies’ repurchase willingness is not as good as expected, and the linkage between repurchase and convertible bonds is restricted Wait.

Table of Contents

Body

Foreword: The repurchase of stocks by listed companies will undoubtedly bring incremental capital. But more importantly, listed companies become the subject of transactions and directly enter the market to influence the pricing framework. The long-term large-scale repurchase wave of US stocks, which is hotly discussed in the domestic market, is precisely the repurchase as an important variable that has affected the pricing framework of US stocks. Companies with strong profitability repay shareholders through repurchases and push up their stock prices pro-cyclically. The A-share repurchase is more similar to that of Hong Kong stocks. It is more used as an emergency tool to stabilize the stock price counter-cyclically, and the repurchase scale is small, which has a very weak impact on the A-share pricing framework. However, under the reform of the system, the repurchase of A shares has increased, and listed companies are allowed to issue convertible bond repurchases. This will undoubtedly open up the space for convertible bond financing and cash repurchase, which will increase the linkage between the fundamentals of listed companies and stock prices, and repurchase will affect A shares. New variables in the pricing framework.

1

System comparison: A-share, U.S. stock, and Hong Kong stock repurchase system comparison

Stock repurchase is Refers to the act of a listed company as a trading entity repurchasing the issued ordinary shares from its shareholders. The repurchased shares can be: (1) cancellation, (2) issuance of convertible bonds, (3) equity incentives, (4) employee holdings Stock plan, (5) sell directly on the market for cash, etc. In most cases, the repurchased shares have no voting rights and no income rights.

1. 1. The A-share repurchase system has been relaxed, but it is still stricter than that of US stocks and Hong Kong stocks

1.1.1. U.S. stock repurchase system: permitted in principle, prohibited by exception

Stock repurchase originated in the United States in the 1950s, and the earliest legal regulations on stock repurchase in the United States appeared in Standard Commercial In the "Company Law", the company's acquisition of its own shares is described as "the company can acquire its own shares, and the shares obtained thereby constitute authorized but not yet issued shares." In the 1970s, during Nixon’s administration, the company restricted the distribution of cash dividends. Stock repurchase became the main form of dividends paid by the company to shareholders. However, because the repurchase of stocks may be suspected of insider trading and market manipulation, the act of repurchasing stocks in the U.S. market Not universal.

The United States law began to deregulate stock repurchase in 1982, and has maintained an open attitude since then. "Permitted in principle, prohibited by exception" is a good explanation of the characteristics of this regulation. In 1982, the SEC formulated Rule 10b-18, which provides a "safe harbor" from the institutional level for stock repurchase. If the repurchase meets the four conditions in Rule 10b-18 (transaction method, time, quantity, price) ), the risk of being judged as insider trading or market manipulation is greatly reduced, which has also prompted the prevalence of U.S. stock repurchase since the 1980s. In 2000, the SEC further formulated Rule 10b5-1, stipulating that companies can pre-publish stock repurchase plans and implement them through automated trading to avoid being considered insider trading or market manipulation. However, because companies do not necessarily carry out repurchase in actual operations, it is misleading to the market. For this reason, the SEC revised Regulation SK in 2003, requiring listed companies to announce the actual results of the previous quarter in regular financial statements such as quarterly reports and semi-annual reports. Share repurchase situation.

1.1.2. A share repurchase system: principlesProhibitions, exceptions, and restrictions have been relaxed

my country’s stock repurchase system started relatively late, characterized by "principle prohibitions, exceptions permitted." Initially, my country’s legislation on stock repurchase can be traced back to the beginning of 1992, when the National Economic System Reform Commission issued a notice on the "Regulatory Opinions on Limited Liability Companies" and "Regulatory Opinions on Limited Liability Companies", which stipulated in Article 32 In principle, it is forbidden for companies to purchase their own issued stocks and not to stock the company's issued stocks. Under exceptions, special circumstances such as capital reductions are provided for acquisition and stocking of the company's stocks. The application for acquisition and stocking of the company's stock is approved by the restructuring department and approved by the peopleBank after approval. In 1993, my country promulgated the "Company Law of the People’s Republic of China" and came into effect on July 1, 1994. It followed the principle of strict control over the company’s acquisition of its own stocks. Shares, except when shares are cancelled to reduce the company’s capital or merged with other companies that hold shares of the company. After the company purchases the company’s stocks in accordance with the preceding paragraph, it must cancel the part of the shares within ten days, go through the registration of changes in accordance with laws and administrative regulations, and make an announcement.

In June 2005, the China Securities Regulatory Commission issued the "Administrative Measures for the Repurchase of Public Shares by Listed Companies (for Trial Implementation)", which opened the historical process of the standardization of my country’s stock repurchase system. The amendment to the "Company Law of the People's Republic of China" was passed in October 2005. The revised Company Law still follows the principle of prohibition and exception permission for share repurchase, but it is more detailed than the previous design. It reflects the legislative intent of the "Company Law" to protect the development of the capital market. The revised law categorizes the exceptions into four categories: capital reduction, merger with other companies holding shares, rewards for employees, and shareholder’s right to object to repurchase requests. Those involving open market share repurchases are used for reductions. The purpose of funding and rewarding employees. However, the legislation at this stage is to a certain extent in order to cooperate with the process of my country's share-trading reform, and to reflect more administrative functions, but has not truly reflected the market-oriented needs of various stakeholders. As the A-share market enters a new tradable market environment, the China Securities Regulatory Commission promulgated the "Supplementary Provisions on Listed Companies Repurchasing Shares by Centralized Auction Trading" in October 2008 to further regulate the stock repurchase behavior of listed companies and make The repurchase behavior is more market-oriented, and its transparency is improved to prevent insider trading.

China’s stock repurchase system has ushered in new developments. In September 2018, the China Securities Regulatory Commission and relevant departments proposed to improve the stock repurchase system of listed companies and solicit opinions on the draft of the "Amendment to the Company Law of the People's Republic of China". On October 26, the 13th National The sixth meeting of the Standing Committee of the National People’s Congress deliberated and passed the “Decision of the Standing Committee of the National People’s Congress on Amendments”, and made special amendments to the provisions of Article 142 of the Company Law concerning the repurchase of company shares, starting from the date of promulgation. Implement. The draft amendment in October 2018 made the following changes to the "Company Law" share repurchase regulations:

First, increase the share repurchase situation. New situations include: employee stock ownership plans, listed companies for equity conversion in conjunction with the issuance of convertible corporate bonds and warrants, listed companies necessary to maintain the company’s credit and shareholders’ rights, legal, Other circumstances stipulated by administrative regulations, etc.

Second, improve the decision-making process. Due to the implementation of employee stock ownership plans or equity incentives, the listed company cooperates with the issuance of convertible corporate bonds and warrants for equity conversion, and the listed company implements the decision-making procedure for share repurchase in order to protect the company’s credit and shareholders’ rights and interests. Be simplified.

Third, extend the holding period of repurchased shares. Clarify that the company’s shares repurchased by the company due to specific circumstances can be held in inventory.

Fourth, some requirements for repurchasing shares have been added.

The biggest difference in this repurchase system modification is the change in the treasury stock system. In the past, the "Company Law" stipulated that the repurchased shares used for employee incentives must also be transferred within one year, and it is not allowed to use the repurchased shares for inventoryTherefore, the market function of share repurchase is restricted to a certain extent. However, the revised company law relaxes this period and essentially allows the existence of treasury stocks. In contrast, stocks repurchased in mature overseas markets can be retained as "treasury stocks" and be issued as convertible bonds or included in employee benefit plans at the right time, or sold when there is a need for funds in the future , So more flexibility. Therefore, this modification of the repurchase system will further give full play to the market-oriented role of share repurchase and increase the enthusiasm of listed companies for share repurchase.

Support the share repurchase in order to maintain the company's value and shareholders’ equity, and further relax the repurchase conditions. On November 9, 2018, the China Securities Regulatory Commission, the Ministry of Finance, and the State-owned Assets Supervision and Administration Commission jointly issued the "Opinions on Supporting Listed Companies’ Share Repurchase Implement equity incentives and employee stock ownership plans. 2. Encourage the use of other market tools to provide financing and other support for share repurchase. 3. Simplify the procedures for implementing repurchase. If the stock price of a listed company is lower than its net assets per share, or the stock price has fallen by 30% within 20 trading days, share repurchases can be carried out to maintain the company's value and shareholders' equity. If a listed company implements share repurchase and reduces its registered capital due to this situation, the restrictions on the stocks’ listing for one year and the current repurchase window period (10 days before the announcement of the regular report or performance bulletin, and the demonstration period of major events) are not applicable. If the shareholders’ meeting authorizes the board of directors to implement share repurchase, it may also authorize the implementation of refinancing. The "Opinions" in addition to supporting the "repurchase protection", further relaxed the conditions for listed companies to carry out repurchase. If the above-mentioned conditions of serious stock price decline are met, they can also repurchase shares within one year of listing, and allow listed companies to repurchase shares on a regular basis. Shares are repurchased in sensitive periods such as 10 trading days before the report or performance bulletin is announced.

1.1.3. Hong Kong stock repurchase system: between A shares and U.S. stocks

The Hong Kong stock repurchase system is "allowed in principle but prohibited by exceptions" and is between A shares and U.S. stocks. The current repurchase system of Hong Kong stocks is biased towards US stocks (permitted in principle, prohibited by exception). Compared with A shares, there are fewer restrictions on the repurchase of shares by listed companies, such as allowing on-exchange and off-exchange (that is, private agreement) transactions. The Hong Kong Stock Exchange has made more specific and detailed strict regulations on the sources of funds, repurchase prices, repurchase procedures, repurchase methods, and information disclosure in the "Comprehensive Main Board Listing Rules." Among them, ordinary resolutions submitted to shareholders for the repurchase of shares must include the total number and type of repurchased shares, and the repurchase quantity shall not exceed 10% of the number of issued shares. In addition, it also stipulates a series of trading restrictions. If the purchase price is 5% or more than the average closing price of the shares on the Exchange in the previous 5 trading days, the issuer shall not repurchase the shares on the Exchange. Shares. At the same time, it also proposes exemptions for trading restrictions. For example, when a political or economic event has a material adverse effect on the price of the shares, the relevant restrictions can be exempted to ensure the stability of the share price under extreme conditions. .

1.1.4. Summary: Under institutional constraints, it may be more reasonable to refer to Hong Kong stocks for A-share repurchase.

From the perspective of legislative models, due to different countries and regions’ cognition, values, and legal systems constructed There are differences in such aspects, and the legislative models formulated or adopted are also different. It is generally believed that there are two legislative models for the stock repurchase system: one is "permitted in principle, prohibited by exception" represented by the United States, and the second is "banned in principle, allowed by exception" represented by Germany. Relevant systems in Mainland China belong to the "principle prohibition, exceptions allowed". The strength of relevant Hong Kong regulations is between A shares and U.S. stocks, but they still fall into the category of "principles allowed, exceptions prohibited".

From the perspective of the applicable circumstances of stock repurchase, in principle, the United States allows listed companies to repurchase shares. The "Model Company Law" of the United States stipulates that companies are allowed in principle to repurchase stocks. The "Delaware Corporation Law" also mentions that companies can repurchase their own stocks without damage or weakening of their capital. The latest regulations in Mainland China have clarified six situations where repurchase is allowed. Hong Kong is similar to the United States. In principle, listed companies are allowed to buy their own shares.

From the perspective of the repurchase process and repurchase restrictions, the US SEC Rule 10b-18 restricts stock repurchase from four aspects: the method, time, price and quantity of repurchase; Mainland China There are different regulations for different stock repurchase situations, andIt is stipulated that the repurchase of stocks cannot be used as a pledge; Hong Kong stipulates that the stocks must be cancelled after the repurchase and imposes certain restrictions on the repurchase price.

From the perspective of financial resource restrictions on stock repurchase, there are currently three types of financial resource restriction models in the United States: the "solvency test" model represented by the US "Model Company Law", and the "California Corporation Law" The “retained income” model represented by the representative and the “surplus” model represented by the New York State Corporation Law and the Delaware Corporation Law; Mainland China currently has a breakthrough in this part of the regulations, and the old regulations require that repurchase funds are required For after-tax profits, the new regulations allow debt repurchase; Hong Kong, China requires that it must come from distributable profits or from the issuance of new shares for the purpose of redemption. Appropriation redemption.

2

Theoretical Research: Repurchase Motivation and Market Effect

2. 1. Repurchase motive theory

Repurchase motive is the essential starting point for the stock repurchase of listed companies, and it is also an important reference factor that influences investors to make correct decisions . The academic community has done a lot of research, which provides theoretical support for us to understand the future changes of A-share repurchase. According to the analysis of the following repurchase principles, repurchasing shares will increase leverage, ROA, ROE, and EPS. If PE remains unchanged, it will also increase stock price.

2.1.1. Motivation for U.S. Stock Repurchase: A comprehensive and multi-level study

Since the United States began to implement stock repurchase in the 1950s, overseas scholars have conducted comprehensive and multi-faceted research on U.S. stock repurchase motivation The level of research has mainly formed the signal hypothesis, excess capital hypothesis, financial leverage hypothesis, M&A defense hypothesis and other repurchase motivation theories. These include: (1) Increase EPS by reducing the company’s equity, while increasing financial indicators such as ROE, ROA, and leverage; (2) Signal underestimation of stock value to the market; (3) Reduce agency costs and ease over-investment issues , Improve the use efficiency of free cash flow; (4) replace cash dividends, reasonable tax avoidance; (5) prevent equity dilution; (6) avoid malicious mergers and acquisitions.

2.1.2. A-share repurchase motivation: mainly qualitative analysis and case analysis

my country’s capital market started late, and the repurchase system is relatively strict. The corresponding repurchase scale and method are similar to those in developed markets. There is a clear gap. The research on stock repurchase has just started. The relevant literature has mostly qualitative analysis and case analysis on repurchase, and there are relatively few systematic theoretical research and empirical analysis.

Generally speaking, the signal transmission hypothesis has been generally recognized and verified in the Chinese market. Xu Guodong, Chi Mingkui (2003), Yizhi, and Zhang Weiqun (2005) used event research methods to study the repurchase signal transmission of listed companies in my country. The results showed that the stock price of the company implementing the stock repurchase was Financial indicators have been improved, investors have identified underestimation signals and responded positively, and the true value of enterprises has received more attention [8][9]. Ma Ming and Yun Huaili (2009) concluded through statistical analysis that the stock repurchase announcements of listed companies in my country have a certain information content, which can convey the information of underestimation of stock prices to the market [10]. Wang Chang (2012) selected 79 repurchase announcements issued from 2005 to 2011 as a sample. Compared with previous studies, the sample size has increased significantly. Through a multiple regression model, he found that the signaling hypothesis has a significant effect on the repurchase motivation of A-share listed companies. Very good explanatory [11].

In addition, before the share-trading reform, stock repurchase motives also included promoting the implementation of the share-trading reform and resolving issues such as one-share dominance. Zou Shuping (2002) believes that the reason for my country’s stock repurchase is to reduce state-owned shares, such as Lujiazui, Changchun High-tech Repurchases state-owned shares to make the company’s capital structure more reasonable [12].

2.2. Repurchase market effect: A-share and U.S. stock repurchase has a positive effect on stock prices

2.2.1. U.S. stock repurchase effect

Most of the existing studies support that after stock repurchase announcements, listed companies can often obtain cumulative excess returns. Vermaelen (1981) used the event research method to investigate the market effect of US stock repurchase, and found that the cumulative excess return rate after the stock repurchase announcement was significantly positive [13]. Comment and Jarrel (1991) further pointed out that tender offer, Dutch auction, and open market repurchase are all accompanied by a significantly positive cumulative excess return rate after the announcement, among which the market effect of offer repurchase is the strongest [14]. Ikenberry et al. (1995) studied the long-term market effect after the public market share repurchase announcement in the United States from 1980 to 1990, and found that the cumulative excess return rate in the four years after the repurchase announcement was 12.1% [15]. The research of Isagawa (2002) shows that there is information asymmetry. The repurchase announcement will reveal the private information of the company's managers. The repurchase announcement is credible, and the stock price fell before the announcement and rose after the announcement [16].

2.2.2. A-share repurchase effect

my country’s current research on the effect of stock repurchase market believes that it has a positive effect under certain circumstances. Wang Wei (2002) believes that if the effect of conveying the information of underestimation of stock prices is greater than the effect of conveying the company’s lack of good investment opportunities, the cumulative excess return rate after the repurchase announcement is positive, and the repurchase of state-owned shares can indeed bring about the A share price The empirical research of Liang Lizhen (2006) found that the Chinese stock market has a positive response to the announcement of the company’s share repurchase, and the cumulative excess return rate after the announcement is significantly positive, but there is a phenomenon of information leakage before the announcement [17]. 18]. Liu Donglin et al. (2009) selected 56 A-share repurchases in my country from 1991 to 2007 as a sample. The study found that the repurchase of non-tradable shares and tradable shares has a positive cumulative excess return, and the repurchase scale and timing, and financial leverage , Corporate governance structure and other factors have a positive impact on the market effect of stock repurchase [19].

3

Data analysis: Compared with US stocks, A-share repurchases are more similar to Hong Kong stocks. In 2018, the scale of A-share repurchases surged and surpassed Hong Kong stocks.

3.1. U.S. stock repurchase characteristics: large scale and procyclical

U.S. stock repurchase scale is large and has certain procyclical characteristics. Using S&P 500 as the representative of U.S. stocks, according to the cash flow data of repurchase shares disclosed in the financial statements of U.S. stocks calculated by Choice, the S&P 500 returns The scale of purchases declined during the 2008 financial crisis. After the financial crisis, the scale of repurchases gradually increased. Since 2011, the scale of repurchase has increased significantly, boosting the upward trend of U.S. stocks. In 2013, the net repurchase amount exceeded US$400 billion, and the net repurchase scale in 2017 Reached 532.2 billion US dollars. As of the third quarter of 2018, this data has reached 466.8 billion U.S. dollars, and the annual rolling quarterly calculation is 619.2 billion U.S. dollars, which is 2.8% of the S&P 500 market value. The scale of S&P 500 repurchase is synchronized with the trend of its index, which has certain procyclical characteristics.

In terms of structure, the scale of information technology repurchase is the largest, and the scale of repurchase in different industries is significantly positively correlated with the net profit attributable to the parent. From the perspective of the industry distribution of S&P 500 component stock repurchases, from 2006 to the third quarter of 2018, the top five industries for repurchase scale were information technology, finance, healthcare, non-daily consumer goods, and industry in order. At the same time, by calculating the net profit of S&P 500 constituent stocks attributed to the parent by industry from 2006 to the third quarter of 2018, it can be found that the size of US stock repurchases is significantly positively correlated with the net profit of the corresponding industry attributable to the parent. It shows that in the long run, the basis for large-scale repurchase of US stocks is its profitability creation ability.

After the financial crisis, large-scale procyclical repurchases of U.S. stocks can be mainly based on the excess funds hypothesis, financial leverage hypothesis and Explanation of the financial flexibility hypothesis. The United States adopts a quantitative easing policy, which makes the long-term interest rate of the United States enter the downward channel, the cost of debt financing has dropped sharply, credit continues to expand, and corporate debt financing has become more convenient. As the economy recovers and corporate profitability rebounds, the yield gap of S&P 500 higher grade corporate bonds has converged. For companies, in order to improve the efficiency of capital use and avoid agency problems caused by excessive excess funds, reducing equity capital by repurchasing stocks can not only increase EPS and ROE, but also increase financial leverage ratios to optimize capital structure and increase companies. Value, making large-scale corporate repurchases push up the stock price. But conversely, rising financing costs and falling corporate profits will also reduce corporate repurchase motivation. In addition, stock repurchase brings capital gains to shareholders, and the tax rate of capital gains in US stocks is lower than the tax rate of cash dividends, and companies such as financing repurchases will also bring tax shield effects, which are conducive to enhancing corporate value [20].

3.2. Characteristics of Hong Kong stock repurchase: small scale, counter-cyclical

Hong Kong stock repurchase is obviously different from U.S. stock repurchase, and repurchase mostly occurs in periods of poor market conditions . According to data, the Hong Kong stock market has repurchased a total of HK$190 billion from 2007 to 2018, which is significantly lower than that of the US stocks. Moreover, the peak period of Hong Kong stock repurchase often occurs in periods when the market environment is poor, such as 2008 when the financial crisis occurred and 2011 when the European debt crisis occurred. Hong Kong stocks experienced two rounds of bear markets, with the repurchase amount being HK$17.3 billion and 103. Billion Hong Kong dollars. In 2018, the global market was turbulent, Hong Kong stocks declined, and the repurchase scale reached a new high, reaching 30.5 billion Hong Kong dollars.

Hong Kong stock repurchase has counter-cyclical characteristics. The number of repurchases has risen sharply during the rapid market downturn, and it is more used as a signal transmission mechanism. From the monthly repurchase situation of Hong Kong listed companies, the monthly peaks of the number of companies implementing repurchase were October 2008, September 2011, January 2016, and October 2018, which were 119 and 87 in that order. , 79, 89. These months have been accompanied by the rapid decline of Hong Kong stocks, with a decline of 22.5% in October 2008, 14.3% in September 2011, 10.2% in January 2016, and 10.1% in October 2018. And as the market stabilized and went up, the number of companies implementing repurchase fell significantly. For example, in October 2008, the Hang Seng Index fell by 22.5%, but it has not yet bottomed out. The number of repurchases that month There were 119 companies. In February 2009, the Hang Seng Index fell by 3.5% and bottomed out, while the number of repurchased companies in the month was 34, and the peak fell by nearly 70%. The repurchase behavior of Hong Kong stocks can be explained by the signal hypothesis. The main purpose of the repurchase of listed companies may be more to send a signal of underestimation of the company's value to the panic market, which is conducive to restoring market confidence.

The overall repurchase intention of Hong Kong stocks is not strong, and the repurchase intention of finance, energy and information technology is the weakest. From the perspective of the industry distribution of Hong Kong stock repurchase, from 2008 to 2018, the top five industries of Hong Kong stock repurchase scale were real estate, non-daily consumer goods, communications services, industry, and daily consumer goods, of which the real estate industry repurchased HK$70.8 billion, accounting for 38% of the total repurchase, far exceeding the rest of the industry. At the same time, calculating the net profit attributable to the parent in different industries of Hong Kong stocks from 2008 to 2018, it is found that the two are slightly negatively correlated, but not significant. With the exception of real estate, finance, information technology, and energy, which are the top industries in terms of net profit attributable to the parent, hardly repurchase, and the repurchase amount/net profit attributable to the parent is less than 0.3%. It shows that Hong Kong stock repurchase is different from U.S. stocks. Repurchase is more an emergency tool than a long-term return to shareholders.

3.3. Characteristics of A-share repurchase: counter-cyclical and substantial growth

A-share repurchase started late, and the repurchase scale increased significantly in 2018. During the share-trading reform period, the share repurchase in the A-share market mainly existed as a special tool for mitigating the encroachment of major shareholders, corporate mergers and acquisitions, and divestiture of non-performing assets. The repurchase scale was small and its development was slow. According to data on A-share listed company repurchase plans calculated by Choice, there were 3, 8, and 40 listed companies that announced stock repurchase plans from 2010 to 2012. After 2013, the development of stock repurchase accelerated, and repurchase incidents gradually increased. In 2018, the A-share listed company repurchase system was further improved. The number of listed companies that announced stock repurchase plans that year reached a new high since 2010, reaching 978, accounting for 27.4% of all A-share listed companies. In terms of repurchase implementation, the actual repurchase amount from 2012 to 2017 was relatively low, with an annual average of 7.3 billion yuan. In 2018, the actual repurchase amount increased significantly to 73.5 billion yuan, an increase of nearly 10 times.

Similar to Hong Kong stocks, A-share repurchases have certain counter-cyclical characteristics, which mostly occur in the market At the bottom of the downward trend, signals of underestimation are sent to the market. According to Choice data, there have been three rounds of craze in the history of A-share repurchase, from October 2012 to January 2014, and from July 2015 to 2016. June 2018, January 2018 to December 2018. Among them, the Shanghai Composite Index fell 2.5% from October 2012 to January 2014, at the bottom of the market, with a range of 11.8 billion repurchases; from July 2015 to June 2016, the Shanghai Composite Index fell 31.5%, and the market was at the bottom of the market. The rapid downtrend bottomed out, and the range of repurchase amounts was 11.1 billion yuan; from January 2018 to December 2018, the Shanghai Composite Index fell 24.6% and fell rapidly. The monthly repurchase amount continued to increase, and the range repurchase amount rose sharply to 73.5 billion yuan. Significantly higher than the previous two rounds of repurchase boom. It shows that the A-share repurchase is similar to that of Hong Kong stocks. It is small in scale and mostly occurs at the bottom of the market. Listed companies announce and implement repurchases to send investors a signal of underestimation of stock prices and enhance investor confidence.

A-shares send signals of underestimation through repurchase, which is a response to the rapid downturn of the short-term market. The rapid decline of A shares in 2018 has exposed the issue of pledges. As part of the policy combination, the repurchase system has been relaxed, and the repurchase scale has increased significantly. Specific to the industry, the top five industries for A-share repurchase amounts in 2018 were optional consumption, industry, materials, information technology, and healthcare. The corresponding repurchase amounts were 22.8 billion yuan, 12.6 billion yuan, 11 billion yuan, and 10.7 billion. RMB 6.5 billion. At the individual stock level, the repurchase ratio has a certain negative correlation with the rise and fall. The main reason is that the short-term market declines rapidly, and companies with greater declines have a stronger motivation to release signals of underestimation through repurchase, and to enhance investor confidence, thereby stabilizing stock prices.

3.4. Summary: US stock repurchase is pro-cyclical, A-share Hong Kong stock repurchase is counter-cyclical, and the interval between the peak of Hong Kong stock repurchase and the bottom of Hong Kong stocks is within 4 months

US stock repurchases have a large pro-cyclical scale, and A-share Hong Kong stock repurchases have a small counter-cyclical scale. The A-share repurchase scale has increased significantly in 2018. From 2012 to 2017, A-share repurchase has developed, but it has been relatively slow. From 2012 to 2017, the average annual repurchase of A shares was 7.3 billion yuan. The average repurchase/market value and the average repurchase/repurchase net profit were 0.02% and 0.29%, respectively, which were lower than the 0.05%, 0.35% and S&P of Hong Kong stocks in the same period. 2.52% and 51.16% of 500. In 2018, the A-share repurchase system was reformed and the repurchase scale was significantly increased to 73.5 billion yuan. The average repurchase/market value and the average repurchase/repurchase net profit were 0.15% and 1.99%, respectively, which exceeded the 0.08% and 0.08% of the Hong Kong stocks in the same period. 0.46%, but still lower than the 2.71% and 53.07% of the S&P 500. The repurchase of US stocks is pro-cyclical, and the repurchase of A-shares and Hong Kong stocks is counter-cyclical. Since 2008, the interval between the peak of Hong Kong stock repurchase and the bottom of Hong Kong stocks has been within 4 months, which has certain guiding significance for judging the bottom of the market. Three rounds of A-share repurchase boom also occurredIn the market bottoming stage, but the peak of repurchase may lag behind the bottom of the market, and this round of A-share repurchase superimposed system changes, the guiding significance of the market bottom needs to be further observed. The difference in the characteristics of A-share repurchase between Hong Kong stocks and U.S. stocks is due to the fact that the repurchase of A-shares Hong Kong stocks is mainly based on sending signals of underestimation to boost the stock price during the market downturn; while U.S. stock repurchases are for improving capital efficiency and optimizing financial leverage. Enhance corporate value and use financial flexibility to avoid taxation as the main means for companies to return to shareholders.

4

A share repurchase outlook: scale, rhythm, structure and new model

The reform of the repurchase system has been implemented, and the A-share repurchase has entered a new stage in 2019. The direct participation of listed companies in transactions will affect the A-share pricing system. On January 11, 2019, the Shanghai and Shenzhen Stock Exchanges respectively issued the "Implementation Rules for the Repurchase of Shares by Listed Companies" (hereinafter referred to as the "Repurchase Rules"), which means that this round of repurchase system reform has been implemented. In 2018, the number of listed companies to be repurchased reached 978, accounting for 27.4% of the number of A-share listed companies. Looking forward to 2019, the new A-share repurchase regulations will ease the repurchase situation, simplify the repurchase procedure, allow the existence of treasury stocks, increase debt financing as a source of repurchase funds, and clarify the requirements for disc-protected repurchase and repurchase share reduction. It reduces the barriers to the repurchase of listed companies, and also gives listed companies more space for autonomy. Listed companies can design repurchase plans based on different considerations, such as issuing convertible bonds to raise funds for repurchase and then conversion, repurchase and re-sale of their own funds, etc. While changing the company's fundamentals, it also directly affects the stock price, and the linkage between fundamentals and stock prices has increased.

4.1. The repurchase scale is estimated to be between 63.1 billion yuan and 218.8 billion yuan. The absolute returns will be the best 15 days after the announcement of the repurchase plan. Industries with more downstream private enterprises, such as home appliances, media, and computers, are more willing to repurchase

4.1.1. Estimation of Potential Repurchase Scale

The relaxation of the repurchase system has given listed companies more flexibility and freedom in repurchase, and the increase in their repurchase enthusiasm has also strengthened listed companies’ " "Investor" function, the repurchase funds of listed companies are expected to become one of the sources of market incremental funds. And the repurchase scale of listed companies is constrained by policies, capabilities and willingness. It is estimated that the repurchase scale in 2019 will be between 63.1 billion yuan and 218.8 billion yuan.

(1) Policy upper limit: According to the "Repurchase Rules", the total number of shares of the company held by the repurchase shall not exceed 10% of the total issued shares of the company. Calculating the total value of the A stock market on February 14 is 53.7 trillion yuan, the upper limit of the policy on the scale of listed companies' repurchase is 5.37 trillion yuan.

(2) Capability upper limit: Although the "Repurchase Rules" specify that listed companies can use debt financing as a source of funds for repurchase, the basis of debt financing is also the profitability of the company itself. Some investors benchmarked the A-share repurchase with U.S. stocks. The repurchase scale of U.S. stocks roughly accounts for half of the net profit attributable to the parent. According to consensus expectations, the net profit attributable to the parent company in 2019 is expected to be 4.4 trillion yuan, so listed companies repurchase The scale is 2.2 trillion yuan. However, according to the previous research, A-share repurchase is closer to Hong Kong stocks and has a large gap with U.S. stocks. It is unreasonable to benchmark A-share repurchase with U.S. stocks. We believe that the A-share repurchase is still based on the profit of the A-share company itself, and the "Repurchase Rules" clearly treats cash repurchase as cash dividends, and the two have an alternative relationship. It is more reasonable to use the size of cash dividends as the upper limit of the repurchase capacity. . According to data, since 2012, A-share cash dividends have increased year by year. In 2018, cash dividends were 948.9 billion yuan, and cash dividends/net profit attributable to the parent increased from 22% to 24%. The proportion of cash dividends has grown relatively smoothly. If calculated at 24% in 2019, the cash dividends in 2019 will reach 1.1 trillion yuan, which can be used as the upper limit of the repurchase capacity of A-share listed companies.

(3) Upper limit of willingness: It is worth noting that the repurchase of listed companies is also restricted by the willingness of the actual controller. According to the nature of the company, in 2018, nearly 50% of the A-share cash dividend was provided by state-owned enterprises, with the highest willingness to distribute foreign companies, and the cash dividend rate reached 41%. However, in terms of repurchase, nearly 80% of the A-share repurchase amount was implemented by private enterprises, and private enterprises have a strong willingness to repurchase, with the repurchase amount/net profit attributable to the parent reaching 8%. The above difference is mainly due to a. The stock price is closely related to the interests of the actual controllers of private enterprises. In the market environmentIn bad times, the actual controllers of private enterprises use cash repurchase instead of cash dividends to boost stock prices and send positive signals to the market even stronger. b. Under the current profit transfer mechanism of state-owned listed companies, the profit turned in is mainly through cash dividends. If the repurchase is adopted, it will face the problem of a decline in the shares of the superior unit and the company's capital reduction. In addition, the current state-owned enterprise assessment mechanism focuses on the management of the company, not the performance of the stock price. Therefore, the willingness of state-owned listed companies to replace cash dividends through cash repurchase is weak. c. According to the classification of the nature of enterprises, a large number of financial institutions are classified as public enterprises. In 2018, bank and non-bank cash dividends in public enterprises accounted for nearly 90%, but the cash dividend rate was lower than that of other industries. In the economic downturn, financial institutions replenish capital through the issuance of convertible bonds and perpetual bonds in order to ensure their operations. Repurchase and capital reduction are contrary to this, and they are more hindered than cash dividends in operation. Therefore, public companies use cash repurchase instead of cash dividends. not optimistic. In summary, from the perspective of the willingness of cash repurchase to replace cash dividends, the repurchase scale is expected to be between 63.1 billion yuan and 218.8 billion yuan (see Table 10 for calculations).

4.1.2. Analysis of repurchase rhythm

A-share repurchase boosts the stock price. After the announcement of the repurchase plan, absolute and relative returns can still be obtained. The absolute return on T+15 is the best. Take the 3192 stock repurchase plans announced from January 1, 2012 to December 31, 2018 as a sample, the day when the repurchase plans are announced is T day, and the 10 days before T are calculated respectively ( refers to The trading day, the same later), the 5th, the same day, and the next 5th, 10th, 15th, 20th, 25th, 30th, the range of the stocks' range of gains and losses and the relative changes in the Shanghai Stock Exchange during the same period will be analyzed. The results showed that the 10 days and 5 days before the release of the repurchase plan, the range of increase and decrease was -0.98% and -0.59%, compared with the Shanghai Stock Exchange's increase and decrease of -0.03% and 0.06% during the same period, indicating that A-share repurchase mostly occurred in The market is falling. At the same time, the increase or decrease on the T day was 0.42%, compared with the increase of 0.42% on the Shanghai Stock Exchange during the same period, indicating that the A-share repurchase has a boosting effect on the stock price, which is consistent with the previous study. It is worth noting that the 5th, 10th, 15th, 20th, 25th, and 30th intervals after the announcement of the repurchase were 0.82%, 1.08%, 1.16%, 0.99%, 0.90%, 0.69%. In the same period, the Shanghai Stock Exchange's gains and losses were 0.77%, 1.08%, 1.23%, 1.19%, 1.24%, and 1.29%, indicating that after the announcement of the repurchase plan, the purchase can still obtain absolute and relative returns, and the absolute returns will be the highest on T+15. good.

4.1.3. Distribution of repurchase structure

Industries with more downstream private enterprises, such as household appliances, media, and computers, are more willing to buy back. From the perspective of the industry distribution of repurchase, the top three industries for the amount of A-share repurchase in 2018 were household appliances, chemicals, and pharmaceuticals. The repurchase amounts were 9.01 billion yuan, 8.37 billion yuan, and 6.03 billion yuan. The bank repurchase amount is 0. The top three industries for repurchase amount/cash dividends are household appliances, media, and computers, with the proportions being 46%, 42%, and 39%, respectively. The distribution of the repurchase industry is consistent with the previous analysis and is closely related to the attributes of the company. Industries with more downstream private enterprises, such as household appliances, media, and computers, are more willing to repurchase, while industries dominated by state-owned enterprises, such as banking, steel, and transportation, are willing to repurchase. Weaker.

4.2. New model: repurchase + convertible bonds may become an important model for listed companies to boost stock prices and refinance

The market pays more attention to the repurchase behavior of listed companies Ignoring the relaxation of the repurchase system, matching the repurchase of listed companies with other behaviors will have a greater chain reaction, and the repurchase + convertible bond model is particularly worthy of attention.

The repurchase + convertible bond model opens up space for convertible bond financing and cash repurchase. On February 17, 2017, the China Securities Regulatory Commission issued the "Question and Answer on Issuance Supervision—Regulatory Requirements for Guiding and Regulating the Financing Behavior of Listed Companies", clarifying that listed companies apply for additional issuance , Allotment, the interval of fixed increase must not be lessIn 18 months, the issuance of convertible bonds is not subject to this restriction, which makes convertible bond financing rise again. The repurchase system is relaxed, cash repurchase is regarded as cash dividends and support for the issuance of convertible bond repurchase, further opening up the space for convertible bond financing and cash repurchase. For listed companies, the repurchase + convertible bond model has five advantages: ( 1) The dilution of original shareholders' equity is weakened. Repurchase shares can be treated as treasury shares, and the accounting treatment at the time of conversion will not increase the total number of shares on the book and will not dilute the original shareholders’ equity; (2) The repurchase will help boost Issuance and conversion of underlying shares and convertible bonds. The new repurchase regulations clarify that while share repurchase can apply for the issuance of convertible bonds, the repurchase will boost the underlying shares and increase the probability of converting convertible bonds into shares, which is also conducive to the issuance of convertible bonds. For companies that have issued convertible bonds, repurchasing to boost the stock price will also help prevent listed companies from triggering resale clauses to increase pressure on fund flows; (3) Repurchase helps listed companies meet the cash dividend requirements of convertible bond issuance; (4) Repurchase through convertible bond financing can reduce the cash outflow caused by cash dividends of listed companies and replenish liquidity; (5) Convertible bonds cooperate with repurchase Purchase can take advantage of the tax difference and obtain the tax shield effect.

May 2019 The allocation value of convertible bonds is prominent, and the fund end supports the repurchase + convertible bond model. Convertible bonds have both equity and debt properties. They are a type that can be attacked and defensive in the allocation of large-scale assets. The value of allocation is prominent in the transition phase of economic recession towards recovery. Since 2003, in the first three rounds of A-share bear markets, the Shanghai Stock Exchange Convertible Bond Index bottomed out before the Shanghai Composite Index. This round of the Shanghai Stock Exchange Convertible Bond Index hit a low point in June 2018, while the Shanghai Composite Index continued to decline, and the convertible bonds performed better than equity. According to the data, it is expected that the growth rate of GDP will decline quarter by quarter in 2019, and the downward trend of PPI will deflate again. The long-term interest rate and equity valuation declines in 2018 have reflected part of the economic recession and passive easing expectations. It is expected that the downturn in 2019 will enter the middle and late stages, and the value of convertible bond allocation will become prominent. While the repurchase of listed companies boosts stock prices and safeguards shareholders’ rights, it is also conducive to triggering the forced conversion of convertible bonds more quickly and increasing the income of convertible bond investors.

There are already listed companies trying to repurchase + convertible bond plans, waiting for specific cases to land. According to the listing company announcement, there is already Tempus International, Dongxu Optoelectronics, Qi Xiang Tengda, Oriental fashion Wait for the release of the repurchase + convertible bond plan, and convertible bond financing is used for repurchase, supplementary liquidity, loan repayment, investment expansion, etc. The five companies' proposed financing repurchase amount/net profit exceeded the cash dividend rate. Listed companies use convertible bonds to raise funds, break capital constraints and repurchase to boost their stock prices, and improve their operating conditions, such as replenishing liquidity, repaying loans, and investing in production expansion. The primary and secondary linkages are more flexible. Currently, among the five companies, Oriental Fashion’s application for the public issuance of A-share convertible bonds has been accepted by the China Securities Regulatory Commission, waiting for specific cases to land.

Focus on A-share listed companies that may link convertible bonds and repurchase. According to the data, according to the convertible bond issuance conditions: (1) Weighted in the most recent three fiscal yearsThe average return on net assets is not less than 6%, (2) the cumulative distribution of profits in cash in the last three years is not less than 30% of the annual average distributable profit realized in the last three years, (3) cumulative The balance of bonds accounted for no more than 40% of the audited net assets of the previous year. If the net assets data is empty, it will be eliminated, and 1614 targets that meet the requirements for the issuance of convertible bonds will be screened out. We further screened out 665 companies that had repurchases from 2012 to 2018. The repurchase + convertible bond model may become an important model for A-share listed companies' primary and secondary market linkages, focusing on A-share listed companies that may be linked with convertible bonds and repurchase.

(Source: Guotai Junan)

Article Url:https://www.liaochihuo.com/info/616444.html

Label group:[stock] [stock issuance] [Hong Kong stocks] [Convertible bond] [marketing strategy] [stock repurchase] [repurchase transaction] [repurchase agreement] [cyclical industry] [U.S. stock trading] [Cash dividend] [Pledged repo] [repurchase rate] [Listed company announcement

Hot topic

Comprehensive recommend

Comprehensive Popular