Large-Quality Stock Buyback Performance Highlights a New Trend, Supporting the Maturity and Steady Development of the A-Share Market

Recently, Midea Group and SF Holding have successively rolled out large share repurchase plans. The former intends to invest up to 13 billion yuan, while the latter has raised the total repurchase funds to a range of 3 billion to 6 billion yuan. This phenomenon reflects that, against the backdrop of deepening reforms in China’s A-share market, share repurchases are evolving from occasional maneuvers into a routine tool used by high-quality listed companies to stabilize their share prices and return value to shareholders. In particular, they have become an important means for top-performing firms with abundant cash flow and steady performance to bolster market confidence.

From the perspective of financial optimization, the immediate effect of share repurchases lies in improving core indicators. When a company maintains stable earnings, by canceling repurchased shares it can reduce total outstanding shares, thereby increasing earnings per share (EPS) and providing more solid intrinsic value support for the stock price. Taking Midea Group as an example, if the full 13 billion yuan is used for the repurchase and the repurchase average price is assumed to be at the current stock price level, its total share capital could shrink by about 5%, and EPS would correspondingly rise by about 5%. This capital operation—described as “using little to achieve a lot”—both does not dilute existing shareholders’ equity and can magnify corporate value through the effect of financial leverage.

For top-performing companies, large-scale repurchases are also a rational choice for capital allocation. These firms typically have two key traits: first, operating cash flow remains consistently positive; second, their core businesses generate stable profits. For example, SF Holding: in 2023, its net operating cash flow reached 28 billion yuan, far exceeding the upper limit of the repurchase funds in this plan. In the absence of high-quality acquisition targets or when expansion demand slows down, using idle funds for share repurchases can both avoid efficiency losses caused by cash being idle and enhance market appeal by improving shareholders’ return on investment. Data shows that, in the year after implementing repurchases, listed companies’ average stock-price gains were 3.2 percentage points higher than those of companies that did not repurchase.

The share-repurchase signal-transmission function is another important value. When a company uses real money to repurchase shares, it effectively sends a clear signal to the market that “the current stock price is undervalued.” This action is more convincing than management’s verbal statements, and it can effectively stabilize investors’ expectations, especially during periods of market volatility. In the third quarter of 2023, when a leading consumer stock’s price fell by 20% due to a short-term industry correction, its announced 5 billion yuan repurchase plan caused the stock price to rebound by 15% within two weeks, fully validating the hedging role of repurchases against irrational sentiment.

From the perspective of the market ecosystem, large-scale repurchases are reshaping resource-allocation patterns. Capital naturally seeks profit. When high-quality companies demonstrate value discovery capability through repurchases, they attract more long-term capital to concentrate around them. According to statistics, among listed companies that carried out repurchases in 2023, the average foreign-investor shareholding ratio increased by 1.8 percentage points, and the concentration of institutional holdings rose by 2.3 percentage points. This “Matthew effect” in turn pressures poorly run companies to improve governance or accelerate exit, helping the market form a differentiated pattern of “valuation premium for high-quality companies and valuation discount for low-efficiency companies.”

Improvements to the regulatory framework provide assurance for the normalization of repurchases. The newly revised “Rules on Share Repurchase of Listed Companies” in 2023 relaxes repurchase conditions, shortens the period of shareholding restrictions, and allows listed companies, under specific circumstances, to carry out repurchases to safeguard corporate value. These adjustments reduce operational costs for enterprises, shifting repurchases from “major events” to “routine tools.” Data shows that in 2023, the total value of repurchases in China’s A-share market reached 180 billion yuan, up 45% year over year, setting a new record.