Europe gets its share of mega buybacks

Bloomberg

Europe’s equity market may finally be getting a hand from the force that has supercharged the US stock rally since the global financial crisis: share buybacks.
European companies have unveiled blockbuster repurchase programmes this earnings season as their cash piles swell amid a continued recovery in profits. In non-UK Europe, net equity issuance has turned negative for the first time in at least a decade, according to Sanford C. Bernstein, while in Britain it has been below zero for about a year and is now near the lowest since 2013.
Rising buybacks are a tailwind for European stocks, which are set to underperform the world for a third straight year. It also shows that the joint phenomena of stock repurchases and a shrinking public market have spread beyond the US, where some lawmakers have raised concern that capital for investment is being wasted and public access to securities curtailed.
“There’s no point putting in all this capex in a much lower-growth environment and there’s only so much you can invest for cost efficiency,” said Roger Jones, head of equities at asset manager London & Capital. “You’ve got to that juncture where it’s much more accepted that buybacks are a useful mechanism in terms of generating some growth and the mechanism for returning cash to shareholders.”
In Europe, repurchases are picking up from a very low base and are still peanuts compared with the record boom in America. They’ve always been less common in the region, a discrepancy that’s usually attributed to a weaker emphasis on shareholder returns and a stronger one on investment.
But with European earnings set for a third straight year of growth, buybacks are re-emerging, led by the energy and commodity sectors, whose profits have benefited from higher resources prices.