Tencent’s buyback plan in focus as Chinese tech rivals catch up

INVESTORS will scrutinise any comments from Tencent Holdings about its buyback plans during Wednesday’s (Aug 14) quarterly results announcement as its competitors catch up with its spending levels.

Tencent has forked out almost US$8 billion this year to repurchase its Hong Kong-listed shares, more than any other company on the exchange, according to data compiled by Bloomberg.

The firm is widely expected to keep spending as its total outlay this year is only about 60 per cent of the US$12.8 billion it projected for the whole of 2024.

The extent of Tencent’s desire to keep its lead will be on investors’ radars as the stock has pulled back from its May highs and its peers are quickly catching up.

Any sign the company is losing its appetite for buybacks may see investors switch their interest to competitors that display greater willingness to use their cash for dividends and share repurchases.

One of the areas investors will focus on for Tencent’s earnings will be whether it has “any room for upsizing its more than HK$100 billion buyback target given above-trend run-rate in 1H24, and any potential for a longer-period share repurchase commitment beyond 2024”, Goldman Sachs analysts including Ronald Keung said this week.

Large Chinese tech companies have conspicuously turned to buybacks this year to enhance shareholder return given their lacklustre sales growth.

Five of the top 10 companies in buyback spending this year in Hong Kong are tech firms, led by Tencent and Alibaba Group Holding, data compiled by Bloomberg show.

Meituan in particular has been narrowing the gap – with its share repurchases this quarter exceeding both Tencent and Alibaba – as the delivery company looks to boost its stock price. Meituan’s board in June approved a plan to repurchase up to US$2 billion of shares in the open market.

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Alibaba may buy back more shares than Tencent in the second half of this year, according to a July note by Bloomberg Intelligence analysts Catherine Lim and Trini Tan. This could also push Meituan “to hasten its repurchases to December”, they said. BLOOMBERG