Tencent Holdings Ltd. is expected to buyback share after trend emerged recently among tech giant to buyback share after Chinese government vowed to stabilize and support the financial market.
Shares of the company climbed as much as 3.1% in Hong Kong on Wednesday, before its announcement of earnings expected to have slowest profit growth ever.
The rationale for its share price to rise was that investors now expects the footsteps of Alibaba Group Holdings Ltd. and Xiaomi Corp. which has announced massive buyback after announcing earnings.
However, although sentiment on Chinese tech sector rose, some strategists believe concrete actions are yet to be seen from the authorities other than the reassurances.
“Alibaba and Xiaomi have probably kick-started shareholders’ focus on buybacks after a horrendous performance in share prices in the last year,” said Kerry Goh, chief investment officer at Kamet Capital Partners Pte as reported by Bloomberg.
“Tougher restrictions on investing in other firms, coupled with a strong balance sheet and good cash flow should motivate Tencent to do a share buyback like the others.”
“In consideration of cash usage, shareholder returns may now become a priority over something, say like the M&A back in the past,” said Vey-Sern Ling, senior analyst at Union Bancaire Privee as reported by Bloomberg.
In terms of Tencent’s capacity to buyback shares, it certainly has the resources as the company holds about $40 billion in cash and short-term instruments on its book as of end of September and is expected to have increased when it reports December quarter results.
