According to the data from financial content platform Dealogic, companies have globally paid $68 billion through share buybacks between January to November this year, the highest since 2018.
Graphic: Global share buyback volume,
The data showed Europe led this year's buybacks, with a total of $27.12 billion, followed by Japan's $16.36 billion, while U.S. firms have spent about $8 billion.
Graphic: Breakdown by sector for global share buybacks, https://fingfx.thomsonreuters.com/gfx/mkt/egvbkombopq/Breakdown%20by%20sector%20for%20global%20share%20buyback.jpg The increase in share buybacks is in contrast to a slump in repurchases in 2020 as companies looked to conserve cash amid uncertain business conditions.
Graphic: Breakdown by region for global share buybacks,
"Companies that performed well during the pandemic found themselves with excess cash and saw their own stock as undervalued compared to others that were achieving unheard of valuations," said Andy DeFrancesco, CEO at private equity firm SOL Global.
"The looming fear of changes to the tax treatment for buybacks has likely accelerated the process."
A surge in oil prices has boosted the energy sector, prompting companies to announce buybacks and dividends.
Chesapeake Energy said this month it would buy back up to $1 billion of its stock, while Chevron Corp increased its share buyback guidance range to $3 billion-$5 billion per year, the level it used to pay before the pandemic.
Exxon, the largest U.S. corporate repurchaser of shares until 2016, vowed to begin quarterly buybacks in 2022.
Banks have also announced higher share buybacks as they had to set aside lesser provisions for bad loans this year due to a fall in corporate defaults.
"Shareholder returns tend to lag earnings growth by a few quarters, so we should see more capital returned to shareholders through buybacks and dividends in 2022," said Bimal Patel, fund manager at Canada Life.
"We expect capex, M&A and dividends to grow in 2022, albeit more slowly than in 2021. We think buybacks will be the one area that accelerates in 2022."
The companies that have announced buybacks have also outperformed the broader markets.
The S&P 500 Buyback Index has risen about 27% this year, compared with the S&P 500 index's 21%. A European buyback index compiled by Solactive(.BUYEU) has risen 25%, versus 16% gains for a benchmark of dividend payers' shares.
As a result, some companies have employed share buybacks to boost share prices and trading volumes.
SoftBank Group announced a buyback last month after it revealed a quarterly loss. French insurer Scor announced a $233 million buyback to offset the impact of floods and hurricane Ida which hit its third quarter earnings.
"There are the companies that have underperformed during the incredible rally over the past year who may want to artificially create demand for their stock in the market and give the impression that volumes are much higher than they really are," said SOL Global's DeFrancesco.
"That may work for a short time but is not a sustainable strategy."
(Reporting By Patturaja Murugaboopathy and Gaurav Dogra in Bengaluru; Editing by Vidya Ranganathan and Toby Chopra)