In mature securities markets, stock repurchases have always been seen as a “smart weapon” to stabilize individual stock prices. However, in the A-share market, large-scale stock repurchases have always been "only the stairs are ringing, and no one is coming down."

Today, this situation is expected to change. The reporter of "Daily Economic News" was informed that the sixth meeting of the Standing Committee of the 13th National People's Congress held on October 22nd was heard by Liu Shiyu, Chairman of the China Securities Regulatory Commission, on the "Amendment of the Company Law of the People's Republic of China (Draft)". The content of the draft shows that Article 142 of the Act, which currently specifies the stock repurchase system, may make major adjustments in the future.

"Daily Economic News" reporters found that the current 3,554 A-share listed companies hold a total of 26.53 trillion yuan of funds. Even if only a small part of it is used for share repurchase, the current market liquidity is also greatly improved. In the case of the lowest market, the group of listed companies holding huge amounts of cash is the most firm long position in the A-share market.

Stock repurchase boosts US stocks

The so-called stock repurchase refers to the behavior of listed companies purchasing their own shares through secondary market transactions, which is one of the common capital operation methods of listed companies. From the perspective of functions, stock repurchases generally have profit compensation, market value management, implementation of equity incentives, equity incentive cancellation, restructuring, and other functions.

Speaking of the role of stock repurchases, the US stock market is one of the best examples. On August 22, US stocks ushered in a new record in history – a bull market of 3,453 days. And many people in the industry, when the reporter of "Daily Economic News" felt that the US stock market had a bull market for ten years, they all mentioned one word: stock repurchase.

China Merchants Securities data shows that in the nearly 10 years after the global financial crisis in 2008, the stock repurchase of listed companies in the United States was huge. From 2010 to 2012, the average annual repurchase was nearly 300 billion US dollars; from 2013 to 2017, the average annual repurchase was about 440 billion US dollars. Among them, the repurchase amount in 2017 was nearly 470 billion US dollars. This year, the size of US stock repurchase has reached a new high. According to incomplete statistics, as of July 12, the size of the stock repurchase of US listed companies in 2018 has exceeded 500 billion US dollars, higher than the 2017 full-year level.

Insiders pointed out that listed companies from the stock market to buy back a certain amount of stock outstanding as treasury shares are canceled or there are two important roles: First, to enhance market confidence, investors can improve the company followed by EPS (earnings per share) of expected.

Stock repurchases also often seen in other mature markets. For example, China's Hong Kong stock market since 2000, there were three share repurchase surges, respectively, in 2008 October to December, 2011 to October 9, 2015 to October 8, three appear in the Hang Seng Index surged repurchase the market bottom area.

Haitong Securities, said the surge in the first three share buybacks in history occurred at the bottom of the Hang Seng Index area, the repurchase period surged more than Hong Kong stocks close to the inflection point. At the same time, through statistical repurchase company characteristics, it can be found that low valuation and high profitability are important reasons for the company to choose to buy back shares. Compared with US stocks and Hong Kong stocks, Haitong Securities concluded that the A-share repurchase is slightly smaller than the Hong Kong stocks, far less than the US stocks, and the A-share stock repurchase has a large growth potential.

What are the obstacles stock repurchase

The draft of the company law submitted to the Standing Committee of the National People's Congress for deliberation, why should we adjust the stock repurchase system?

At the 22nd meeting, Liu Shiyu first introduced some problems existing in the current stock repurchase system. For example, the scope of the stock repurchase is limited, and it is difficult to adapt to the company's implementation of equity incentives and timely take stock repurchase measures to stabilize the stock price. Need; the procedure for implementing share repurchase is more complicated (generally required to convene a general meeting of shareholders), which is not conducive to the company to seize market opportunities in a timely manner, and timely formulate and implement a share repurchase plan; the time limit for the company to hold the repurchased shares is relatively short, It is difficult to meet long-term equity incentives and the need to stabilize stock prices.

The "Daily Economic News" reporter studied the current company law Article 142 and found that at present, the law only allows the company to repurchase shares under the following four conditions: 1. Reduce the company's registered capital; Other companies of the company's shares are merged; 3. The shares are awarded to the employees of the company; 4. The shareholders disagree with the company's merger and resolution resolutions made at the shareholders' meeting and require the company to acquire its shares.

From the current A-share market, the reason for many companies to buy back shares is to "stabilize the stock price." For example, in July this year, A-share listed company Midea Group issued a report stating that “in order to match the stock price with the company value, maintain the company's market image, enhance investor confidence, and safeguard investor interests,” the company decided to buy back shares.

Strictly speaking, the current company law does not recognize that companies can buy back shares for the above reasons. Therefore, in its report, Midea Group chose to use the conditions that appear in the current company law of “reducing the company’s registered capital” as another reason for its stock repurchase.

Repurchasing shares will not only benefit the company, but will also bring tangible benefits to investors. By repurchasing shares, investors can hold more shares, and the net profit per share, company equity, and investment value will increase to promote stock price increases. The rise in share prices brought about by share buybacks can also increase investor investment income.

How will the repurchase system change?

A. The three new stock repurchase cases are “the use of shares to convert convertible corporate bonds issued by listed companies”; the second is “listed companies to protect the company’s value and shareholders’ equity in order to avoid significant damage to the company. "Three" is "other circumstances as stipulated by laws and administrative regulations."

In this way, if the draft is approved, the A-share listed company will become "justified" by stock repurchasing to maintain its market value.

B, the repurchase of stocks can be "stocked" for three years

From the perspective of mature market experience, another benefit of stock repurchase for the management of market capitalization is also reflected in the “stock stock” system.

A treasury stock is an issued share that is purchased by the company without being cancelled and held by the company. The data shows that in the developed securities market, many functions of treasury stocks have been gradually explored, including stabilizing stock prices, employee equity incentives, issuing transferable bonds and adjusting capital structure.

However, according to China's current company law and related regulations, there is no treasury stock system in China. Article 142 of the current company law stipulates that a company's share repurchase must be transferred within ten to six months, or transferred to an employee within one year, that is, the listed company's treasury shares are not allowed.

The draft stipulates that “belonging to item (3) (using shares for employee stock ownership plans or equity incentives) and item (5) (using shares for conversion of listed company bonds convertible into stocks) In the case of item (vi) (the listed company is necessary to prevent the company from suffering major damages and safeguarding the company's value and shareholders' rights), the total number of shares of the company held by the company ... shall be transferred or cancelled within three years.

In other words, the company can “inventory” its shares for three years in the future. This will not only help the company to manage the market value by repurchasing stocks, but also facilitate the company to better complete the long-term (usually 2~3 years) equity incentives.

C, the repurchase process does not have to be resolved by the shareholders' meeting

The "Daily Economic News" reporter noted that another reason why the current A-share market listed companies are not active in repurchasing stocks is that the current stock repurchase system is quite cumbersome. For example, the current law stipulates that a company's share repurchase must be resolved by a general meeting of shareholders. This has made it impossible for listed companies to flexibly grasp market opportunities and has created obstacles for many companies interested in repurchasing shares.

In this regard, the draft amendment to the company law shows that if the company uses shares for employee stock ownership plans or equity incentives, converts corporate bonds that can be converted into stocks issued by listed companies, and listed companies to protect the company from major damage, maintain the company. The value and shareholders' rights must be determined in accordance with the provisions of the company's articles of association or the authorization of the general meeting of shareholders, and more than two-thirds of the directors attend the board meeting resolutions, without the resolution of the shareholders' meeting. As a result, the company's process of repurchasing shares will be greatly simplified.

The reporter also noted that the draft also emphasized the openness and transparency of share repurchase. Liu Shiyu said that in order to prevent listed companies from abusing the share repurchase system, triggering the manipulation of interests such as market manipulation and insider trading, and increasing the requirement for listed companies to acquire shares of the company, they should fulfill their information disclosure obligations in accordance with the provisions of the Securities Law. Except as otherwise stipulated by the state, the acquisition of shares of the company by a listed company shall be conducted through an open and centralized transaction.

Repurchase scale or exceed expectations

If we use "money funds", that is, cash, bank deposits, and other monetary funds, to measure the maximum size that A-share listed companies can use for share repurchase, we can draw such a rough outline. According to the 2018 mid-year report, the “money funds” of A-share non-bank listed companies totaled 9.63 trillion. If the bank shares are included, the amount of funds held by 3,554 A-share listed companies is as high as 26.53 trillion yuan, calculated as “cash and deposits with central bank”. It can be seen that the scale of funds available for A-share listed companies to be used for stock repurchase is not small, and there is a large room for growth in repurchase scale.

Regarding the positive significance of stock repurchase, the research report issued by Oriental Securities on September 25th is mainly reflected in four aspects:

First, directly improve the EPS of listed companies, especially when the company's value is underestimated, the repurchase can directly increase the return on net assets and increase the attractiveness of the company's stock to investors. Especially when the market is weak, listed companies can effectively protect shareholders' rights through stock repurchase.

Second, strengthen the regulation of financial leverage. The direct consequence of the repurchase of shares is to reduce net assets and, to a certain extent, promote a modest increase in the company's asset-liability ratio. If a listed company can effectively grasp the company's operating conditions, the repurchase can better play the role of financial leverage.

Third, share repurchase is also a way for listed companies to pay dividends. Due to the tax difference between personal income tax and capital gains tax, it is more cost-effective for investors to pay dividends through repurchase than cash dividends.

Fourth, enhance the holding ability of major shareholders to prevent malicious acquisition by competitors. There is a clear advantage in repurchasing and canceling shares, that is, the total shares of listed companies have decreased, and the share of major shareholders will naturally increase. In particular, in some cases, large shareholders continue to increase their holdings by many restrictions, but through The way in which listed companies repurchase shares will increase the shareholding ratio and can avoid relevant issues. In addition, stock repurchases are also an effective way to prevent hostile takeovers.

In addition, Orient Securities pointed out that the normalization of stock repurchase is one of the cornerstones of the future "slow cow" of A-shares. It is an important way for listed companies to operate capital, which can stabilize the company's stock price and effectively protect investors' interests.

1. Introduction of Double Wire Fence:
Materials: Heavy Low Carbon Wire, Heavy Mild Steel Wire, Stainless Steel Wire 
Wire Dia.:2x6mm, 2x8mm
Mesh Openings:50*200 mm, 55*200 mm, 50*100 mm,50*150 mm ,etc.
Fence Width:2500mm 
Height Fence:630,1030,1230,1430,1630,1830,2030,2230,2430mm
2. Application of double wire fence:
double wire fence has simple structure ,firm and durable,easy to difficult to fade , so mainly used in highways,
airports,railway stations,service areas ,airports,ports and other fields,using high quality of iron wire as raw material,and welded panel ,after galvanized and powder coated is anti-corrosion and anti-oxidation.
3. Surface Treatment of double wire fence:
Forms of corrosion resistance include electric galvanizing,hot dipped galvanizing, PVC spraying and PVC coating(the thickness of powder coating is 100 microns usually). 
4. Post:
Square Post: 50*50mm,60*60mm,80*80mm,100*100mm (thickness 1.5mm-2.5mm)
Rectangular post: 80*60*2.5mm, 120*60*3mm
Peach Post: 50*70mm,60*90mm,70*100mm(thickness 1.5mm-2.5mm)
Post height: 1100-3000mm (remain 500mm under the ground)
5. Production process:
straighten & cut short the wire --- welding --- bending --- galvanizing --- parkerizing ---powder/pvc coating ---packaging

Double Wire Fence

Double Wire Fence,Wire Mesh Fencing,Double Wire Mesh Fence,Galvanised Mesh Fencing

Anping Bochuan Wire Mesh Co., Ltd. , https://www.wiremeshbocn.com