Analyst: slow economy may hamper share buyback

BUYBACK STALLED::Despite TWSE urging, troubled times in the world economy means companies are cautious of embarking on share buyback programs

Staff writer, with CNA

Sat, Oct 20, 2012 - Page 14

The weakness of the world’s economic fundamentals is expected to prevent locally listed companies from coming up with further share buyback programs, an analyst said yesterday.

“The equity markets at home and abroad remain haunted by economic uncertainty, paving the way for further volatility down the road,” Hua Nan Securities (華南永昌證券) analyst Henry Miao (苗台生) said.

“Under such unfavorable circumstances, I suspect few companies will be willing to jump on to the trading floors to buy back their own shares at the moment,” Miao said, responding to a call from the Taiwan Stock Exchange (TWSE) for share buyback activity.

A day earlier, the TWSE had issued a statement urging locally listed companies to stage share buyback programs in a bid to inject funds into the market to boost daily turnover and help the local bourse find a way out of its current doldrums.

Despite the TWSE’s call, the benchmark TAIEX closed down 0.76 percent at 7,408.76 yesterday, with a thin turnover of NT$58.20 billion (US$1.99 billion).

On Monday, turnover on the local bourse fell to a low of NT$46.38 billion since May 28, when the figure was NT$45.62 billion.

For this week, turnover in the past five trading days totaled NT$289.83 billion, the lowest weekly level so far this year.

After taking into account retained earnings registered by the 779 listed companies on the main board, their cash and cash equivalent as of the end of June, the TWSE estimated there are to be about NT$1.87 trillion in funds available for companies to buy back their own shares.

Once their share buyback plans start, the local bourse will be energized on the back of fund injections, the exchange said.

“I am afraid that the TWSE’s call for share buyback programs will not be received well in the market,” Miao said. “No companies want to book losses from share buyback at a time when the market is moving downward.”

According to the TWSE, a total of 66 share buyback programs have been completed to purchase stocks worth NT$7.28 billion so far this year. Another 11 programs are underway, expecting to buy back shares worth an additional NT$852 million, the exchange said.