Alibaba Group Holding Ltd. And Xiaomi Corp. both announced massive stock buybacks right after their earnings, which cause the stocks to rapidly grow. One factor that is also important to mention with rising of Chinese stocks is, that it gives hope that China’s crackdown on tech sector is coming to an end, because government also promised bigger support for the economy and capital markets. However, before the market reacts, we will have to wait that government actually does some action towards this.

Theory behind stock buybacks is that they reduce the number of shares available in the market and all things being equal – increase earnings per share. Usually, the price of stocks goes up when this happens, however it is not 100% necessary it will do so.

Performance of Tencent stock on HK stock exchange in 5 years. (Source: Trading Economics)

Sources:

https://tradingeconomics.com/700:hk

https://www.investopedia.com/articles/financial-advisors/121415/stock-buybacks-good-thing-or-not.asp

https://www.scmp.com/business/markets/article/3171482/hong-kong-stocks-approach-3-week-high-xiaomi-wuxi-earnings

https://finance.yahoo.com/news/tencent-share-buyback-speculation-grows-025634923.html

https://www.investing.com/news/stock-market-news/tencent-share-buyback-speculation-grows-after-alibaba-xiaomi-2789888

https://www.moneyweb.co.za/news/tech/tencent-share-buyback-speculation-grows-after-alibaba-xiaomi/