Mar 10, 2020 (China Knowledge) - Drastic drops in the international oil price and the global stock market has prompted China's home appliances giant, Midea Group (000333) to fall 3.42% yesterday. On the same day, Midea activated its shares buyback program with RMB 32 mln investment exercising shares buyback. This is the first exercise since the company had earlier announced to launch a shares buyback plan for 2020.
The company acquired the shares through centralized bidding for 595,000 shares, with the highest price per share at RMB 54.18, and the lowest at RMB 53.88. The total sum for the shares buyback amounted to RMB 32.12 mln (excluding transaction fees).
Due to the impact of the epidemic outbreak on consumption for household appliances, China International Capital (CICC) has just lowered Midea’s profit forecast. In addition, the northbound capital from Hong Kong Stock Connect has seen net selling Midea’s stock for 28 consecutive trading days from Jan 21 to Mar 6, totaling 128 mln shares, or 1.83% of total shares. That is to say, the investment derives from the HK Stock Connect has reduced proportion, and could further reach 2% if there is continuous shorting for another 9 mln of Midea’s shares. If that takes place it will resume non-restrictive foreign trading of Midea once falling below the China Securities Regulatory Commission’s (CSRC) capped ceiling of 28% foreign ownership.
To cope with the downward revenue during the nationwide compulsory homestay quarantine, and to tackle the "only sell out" by foreign capital, Midea has launched a ‘blockbuster’ buyback plan for 40 mln to 80 mln shares buyback in the following 12 months that could cost about RMB 5.2 bln.
Prior to that, the company had also spent RMB 4 bln in 2018, and RMB 3.2 bln last year on shares buyback. It is clear that the company is prepared to spend aggressively to support shares price with the planned amount of more than RMB 10 bln over 3 years from 2018 – therefore, another spare RMB 5 bln or so to hold up its shares price.
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