Share buybacks in S'pore fall to $425m

The SGX centre along Shenton Way.
The SGX centre along Shenton Way.ST PHOTO: DESMOND WEE

Stronger stock market price gains in 2017 made such exercises too costly for listed firms

The level of share buybacks slumped dramatically last year as soaring stock prices made such exercises too costly for listed firms.

About $425 million worth of shares were repurchased by 82 companies in 2017, compared with $826 million worth bought back in 2016 by more than 100 firms.

Share buybacks involve issuers repurchasing stock on the open market. These shares are then converted into treasury shares.

Last year's drop in buyback levels corresponded with comparatively stronger share price gains, said a report on the Singapore Exchange's My Gateway investor education portal on Thursday.

The benchmark Straits Times Index put on 18.13 per cent last year.

Mr Liu Jinshu, head of research at NRA Capital, said: "When the market does better, there are fewer opportunities for companies to do buybacks."

This is because investors often prefer to hang on to their shares.

"But buybacks can be useful as a signalling tool for companies to show that their share price is undervalued," Mr Liu added.

Singapore-based CMC Markets sales trader Jane Fu said shares here have an average price-to-earnings ratio of around 11 times, so they are still cheap compared with those in markets like Hong Kong and mainland China.

"So, for companies like OCBC, buying back its own undervalued shares helped to attract investors' attention," added Ms Fu.

OCBC Bank accounted for 52 per cent of the buybacks last year.

Ms Ang Suat Ching, its head of funding and capital management, said: "We execute our share buybacks on a regular basis in order to meet delivery obligations under our employee share schemes."

She added that the lender takes into consideration factors such as daily market volume and price.

Nine other companies together accounted for 29 per cent of the buyback outlay.

They were Keppel Corp, Silverlake Axis, Yanlord Land, Singapore Technologies Engineering, SIA Engineering, Bumitama Agri, Singapore Post, DeClout and M1.

August last year was the busiest month, with shares worth $59.7 million repurchased. June was next at $51.5 million, then May at $48.6 million.

Companies were active as the year ticked down as well, with 27 firms picking up around 28.3 million shares in December for an outlay of $42.9 million.

That was up 9 per cent on November and nearly five times the value of buybacks in December 2016.

A version of this article appeared in the print edition of The Straits Times on January 06, 2018, with the headline 'Share buybacks in S'pore fall to $425m'. Print Edition | Subscribe