(The views expressed here are those of the author, the founder and CEO of Emmer Capital Partners Ltd)

HONG KONG - Asian companies have traditionally preferred to return excess cash to shareholders via dividends, rather than buybacks.

However, that seems to be changing, especially in North Asia. If this buyback momentum persists, the valuation boost could be significant – but regulatory support will be key.

Asian companies have bought back shares worth around $266 billion in the first eight months of 2025, almost 70% more than they did in all of 2024, according to FactSet.

The markets accounting for the most buyback activity include Japan, where firms bought back almost $110 billion, and Hong Kong, where companies scooped up around $105 billion. China and South Korea represent the majority of the remainder.

While a significant portion of U.S. corporate buybacks have been funded by debt, Asian share repurchases are supported much more frequently by companies’ increasing free cash flow (FCF). In other words, Asian companies are genuinely returning excess cash to their shareholders, not just handing over borrowed money.

The free cash flow coming from the "Big Four" share repurchasing Asian markets – Japan, China, Hong Kong and South Korea – has not only grown over the past four years, but it has hugely outstripped their respective buyback volumes, according to FactSet.

In fact, only a fraction of Asian companies’ FCF has been used for buybacks in recent years: 6% in 2021, rising to around 10% in 2022 and then hovering in the 9% to 9.5% range throughout 2023 and 2024. In contrast, the proportion in the U.S. during 2023-24 was between 41% and 49%.

This suggests that there is still room for Asian companies to increase their buyback volumes.

REGULATORY PUSH

Regulatory support in Japan, South Korea and China has played a significant role in the trend toward more shareholder-friendly policies, including the increased use of buybacks.

Japan was the first of the three to implement policies focused on boosting shareholder value, with efforts initially announced in March 2023. The Tokyo Stock Exchange encouraged companies to regularly communicate with their shareholders about their plans for improving return-on-equity (ROE).

Consequently, many management teams pursued the quickest route to ROE enhancement: returning cash to shareholders via dividends and buybacks.

Beijing followed suit in December 2023, when the China Securities Regulatory Commission (CSRC) relaxed rules for share buybacks by listed companies. In March 2024, the CSRC doubled down with policies encouraging companies to put in place buyback plans in response to short-term share price volatility.

Meanwhile, South Korea's oft-discussed "Value Up" programme, instituted in February 2024, encouraged dividend payments and buybacks among other measures in an effort to enhance shareholder value.

These regulatory nudges were followed by an explosion in buyback and dividend volumes in all three markets.

But why did buybacks make up a larger percentage of this activity compared to the past?

In a word, valuations.

Economic theory suggests that companies pursue buybacks when they believe their stock is undervalued. Asia’s emerging buyback boom largely seems to be following this principle. Companies in South Korea, Hong Kong and Japan trade at price-to-book multiples of between 1 and 1.5, significantly lower than the Asian average of 1.7. Onshore China is the exception, with a multiple just above 2.

REPEAT PURCHASERS

This burgeoning buyback trend has been driven, in large part, by a few Asian companies that have been buying back their shares fairly regularly and often in large quantities in recent years.

The top 10 Asian share repurchasers over the past five years are predictably spread across Hong Kong and Japan, the region’s largest buyback markets.

Five of the top 10 are banks, insurance companies and investment firms, likely reflecting their relatively low valuations. Chinese internet platforms Alibaba and Tencent, both big cash generators, stand out as well.

Not all of the biggest buyers have been consistent repurchasers though. For example, Agricultural Bank of China and Industrial and Commercial Bank of China bought back only once and twice, respectively, in the past five years.

The seven consistent repurchasers, with the exception of the Japanese telephone company NTT, saw their shares perform well over the past year, with four outperforming their home market handsomely. While the outperformance certainly cannot be attributed only to rising buybacks, these corporate actions clearly supported share prices.

CAN IT CONTINUE?

Will Asian corporates continue returning more cash to shareholders via buybacks? The longevity of this trend will likely depend largely on whether there is further regulatory support, particularly shareholder-friendly tax reforms, such as reducing taxes on buybacks.

The path may not be smooth, though, as governments face competing priorities, particularly given the unknown economic impact of the spike in U.S. tariffs on the region’s exports.

For example, South Korea recently surprised investors by announcing an increase in the securities transaction tax, a move that could put downward pressure on buybacks and dividends.

Rising valuations, as we have seen this year in Hong Kong and South Korea, are another issue, as this could make stock repurchases less attractive.

Many of the large North Asian economies have appeared to be heading in a more shareholder-friendly direction in recent years. Given the rapidly shifting global economic backdrop, it remains to be seen whether this trend will now persist or go into reverse. (The views expressed here are those of Manishi Raychaudhuri, the founder and CEO of Emmer Capital Partners Ltd. and the former Head of Asia-Pacific Equity Research at BNP Paribas Securities).

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(Writing by Manishi Raychaudhuri; Editing by Anna Szymanski and Jamie Freed)