Hong Kong-listed shares of Chinese online retailer JD.com saw a 1.2% increase on Wednesday following the announcement of a $5 billion buyback. This outperformed the decline on the Hang Seng index, where JD.com’s shares have dropped about 20% year to date. In comparison, the Hang Seng index was down about 0.82% on Wednesday but has seen a 4% increase for the year so far. This move marks JD.com’s second buyback this year, following a $3 billion buyback in March.
Chelsey Tam, a senior equity analyst at Morningstar, noted that JD.com’s decision to announce the share buyback is not surprising given the common theme in China when share prices and growth are low. This move comes after Vipshop, another Chinese e-commerce player, increased its own share buyback program last week. The e-commerce sector in China has been facing challenges due to a slow domestic economy. This was evident in Alibaba’s second-quarter results that missed expectations on both the top and bottom lines, as well as in Pinduoduo’s recent poor performance after its second-quarter results failed to meet revenue and earnings per share expectations.
The news of JD.com’s buyback led to a 2.24% increase in U.S.-listed shares of the firm on Tuesday. Both the Hong Kong and U.S. shares of JD.com have experienced a 20% drop year to date. The Hong Kong-listed shares of JD.com’s rise following the buyback announcement was notable as it outperformed the decline on the Hang Seng index. This latest buyback announcement comes after Alibaba announced a $25 billion share buyback in February, following its failure to meet revenue targets for the fourth quarter of 2023.
The e-commerce sector in China has been struggling in the face of a slow domestic economy, with companies like JD.com, Alibaba, and Pinduoduo seeing declines in their stock prices. The decision to announce share buybacks by JD.com and other players in the industry reflects a common theme in China when share prices and growth are low. This strategic move aims to boost investor confidence and support the company’s stock price amid challenging market conditions. Investors will be closely watching the impact of JD.com’s buyback on its stock performance and overall market sentiment in the coming weeks.
