YICAI｜China's Stock Buyback Loan Program Reaches USD4.9 Billion in a Month

(Yicai) Nov. 21 -- Chinese listed companies have secured CNY35.2 billion (USD4.9 billion) in loans through the country's stock buyback borrowing scheme launched one month ago.

So far, 152 listed firms have announced their participation in the stock buyback loan program, of which 109 with share repurchases and 43 with stakeholding increases, according to data from Wind Information. Nearly two-thirds of them are private companies.

Yesterday alone, China Resources Chemical Innovative Materials, Zanyu Technology, Tecon Biology, AiSen Semiconductor Material, and other companies announced how they plan to use the loans they have obtained.

The People's Bank of China unveiled the new re-lending facility on Sept. 24, with initial funding of CNY300 billion (USD41.4 billion), as part of a broader economic stimulus package. It officially launched on Oct. 18, and the first batch of 23 participants was announced two days later.

Commercial banks can offer stock repurchase loans at rates up to 50 basis points higher than the facility's 1.75 percent benchmark, Governor Pan Gongsheng said at a press conference. By allowing businesses and major shareholders to use loans to buy back their own shares, the PBOC aims to boost stock prices, support liquidity, and increase investor confidence in Chinese markets, Pan added.

"This new financial instrument is gaining rapid market acceptance, helping stabilize share prices, boost market confidence, and promote the high-quality development of listed companies," Tian Lihui, dean of the Financial Development Research Institute at Nankai University, told Yicai. He also said he expects the program's scale to maintain rapid growth.

Removing shares from the market with buybacks will boost companies' earnings per share, thus benefiting shareholders, Liu Jinjin, chief China equity strategist at Goldman Sachs, told Yicai. "We expect the total amount of repurchased shares to double next year compared to this year," Liu noted.

However, there are some concerns. Tian warned that buybacks and increased shareholdings do not guarantee stock price appreciations, so investors should carefully evaluate companies' debt servicing capabilities before making moves.

https://www.yicaiglobal.com/news/chinas-stock-buyback-loan-program-reaches-usd49-billion-in-a-month