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Aug share buybacks hit 3-year high on STI slide

Banks lead purchases worth S$245m, fuelled by share price fall and strong results

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Share buybacks hit a 35-month-high in August as the benchmark Straits Times Index (STI) lost colour.

Singapore

SHARE buybacks hit a 35-month-high in August as the benchmark Straits Times Index (STI) lost colour.

Some 43.6 million shares worth S$245.4 million were repurchased by as many as 30 companies, more than twice July's buyback consideration of S$109 million, It was also four times the S$59.7 million chalked up in August 2017, bourse operator Singapore Exchange (SGX) said in an SGX My Gateway report on Tuesday.

Share buybacks - which see companies converting the bought-back stock into treasury shares - have not reached such levels since Sept 2015.

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Speaking to The Business Times, Carmen Lee, head of research at OCBC investment research, noted that the strong pick-up in buybacks in the post Q2 earnings season could be down to two main reasons.

She said: "Post results, most companies are out of the blackout period and can participate in buying back their own shares, and valuations have come off significantly for the Singapore market. Companies see this as an opportune time to buy back their shares."

Joel Ng, head of research at KGI Securities (Singapore) added: "Over the last 2-3 months, we have seen a pullback in equity markets (excluding the US) which have been affected by trade tensions and weaknesses in emerging markets. This has contributed to a decline in share prices."

These growing concerns pared 3 per cent off the Straits Times Index (STI) in August.

Last month, DBS Group Holdings topped the share buyback list by value, scooping up 5.95 million of its own shares for S$150.8 million, or roughly 61 per cent of the value of all share buybacks in August.

A DBS spokesman told BT: "DBS buys back shares periodically to support the vesting of awards for our employee share plans and as part of capital management."

Of the top five stocks that were bought back by issuers, the three local banks accounted for 77 per cent of all buybacks. Mr Ng noted that the Singapore-listed banks may be driven by their strong results and intention to raise future dividends. With higher dividends, a smaller share base would help mitigate the total dividend payout.

In addition, a 10-15 per cent fall in share prices from the year's peak have also made the banks' stock more attractive for a buyback. Joining the banks in the top five share buybacks by value were property players CapitaLand and City Developments. Together, the top five stocks accounted for about S$230.2 million, or 93 per cent of August's buybacks.

Ms Lee said: "Currently, the market is trading at below the 10-year historical average in terms of price-earnings ratio and with the STI stocks giving an average dividend yield of 4.2 per cent, value is starting to show in the market, especially for the core index stocks."

Nine companies started new buyback mandates in August. These included City Developments, Stamford Land Corporation, Singapore Shipping Corporation, Maxi-Cash Financial Services Corporation and Japan Foods Holding among others. A similar number of companies commenced buyback mandates in July.

Among non-index stocks, HRnetGroup posted the largest buyback consideration in August.

The Singapore-headquartered recruitment agency, which has agencies across Asia, bought back 2.4 million shares for a consideration of S$2.2 million.