Share buybacks are emerging as an increasingly important tool for Malaysian companies seeking to support share prices, enhance shareholder returns and signal confidence amid recent regional equity market outflows, according to Kenanga Research.
In its latest market strategy report the research house noted that Malaysia has become relatively active in the use of share buybacks, with around 17% of listed companies participating in such programmes over the past two years.
Adding that share buybacks complement traditional dividend payouts by providing companies with greater flexibility in managing excess cash and capital allocation. Shares repurchased may be held as treasury shares or cancelled, reducing the number of shares in circulation and potentially improving earnings per share (EPS) over time.
Buybacks Often Seen as a Signal of Undervaluation
Kenanga’s analysis of more than 175 Malaysian companies that conducted share buybacks since 2024 found that nearly 60% of buybacks occurred when companies were trading at a price-to-book (P/B) ratio of 1.0 times or below.
The research suggested that buybacks are frequently viewed by investors as a signal that management believes the company’s valuation does not reflect its underlying fundamentals.
Around 60% of buybacks were also initiated when share prices had declined between 0% and 10% over the preceding month, although about a quarter occurred even when share prices were rising. This indicates that some companies view buybacks as part of a longer-term capital management strategy rather than merely a response to short-term weakness.
Kenanga observed that share buybacks have shown some effectiveness in stabilising share prices, with post-buyback one-week returns turning positive more than half the time in its study.
Dividends Still Dominate Shareholder Returns
Despite growing interest in buybacks, dividends remain the dominant method of returning capital to shareholders.
Kenanga estimated that aggregate share buybacks account for only about 2% of total dividends paid across the market. However, among companies that actively conduct buybacks, the amount is more meaningful, representing roughly 10% of dividends distributed.
The research noted that industrial and consumer sectors have been among the more active users of share buybacks, with activity increasing during periods of market weakness, particularly following volatility in 2025.
Malaysia Ahead of Some Regional Peers
Malaysia remains relatively active compared with other ASEAN markets, with about 110 companies — or approximately 10% of listed firms — conducting share buybacks in 2026. This compares with around 43 companies in Thailand and 65 companies in Indonesia.
However, neighbouring markets have introduced more flexibility to encourage buybacks.
Indonesia has allowed greater flexibility during periods of market stress, while Thailand has extended the holding period for repurchased shares and eased restrictions to encourage companies to use buybacks more frequently.
Kenanga noted that Malaysia remains comparatively less restrictive, with no statutory holding period for treasury shares, although annual shareholder approval requirements remain in place as a governance safeguard.
More Opportunities Seen Among Mid-Cap Companies
While large-cap companies generally have strong dividend payout records, Kenanga believes more opportunities exist among mid-cap companies with healthy balance sheets.
The research house highlighted that companies beyond the top 30 FBM KLCI constituents tend to have more room to adopt buybacks, particularly those with gearing below 0.5 times and dividend payout ratios below 50%.
Among larger companies, Kenanga believes buybacks could complement dividend policies by allowing firms to support valuations during periods of temporary market weakness.
It highlighted several companies rated Outperform that have engaged in buybacks, including AmBank Group, PPB Group Berhad, QL Resources Berhad, IJM Corporation Berhad and Solarvest Holdings Berhad.
Buybacks Could Become More Relevant Amid Market Volatility
With regional markets facing foreign fund outflows, Kenanga said share buybacks could play a bigger role in improving investor confidence and supporting valuations.
The research house believes companies with excess cash and limited investment opportunities above their required return thresholds may increasingly consider either higher distributions or buyback programmes.
As Malaysian companies place greater focus on cost of capital and shareholder returns, Kenanga expects share buybacks to become a more established component of corporate capital management strategies.
