Nissan shares skyrocket on share buyback announcement

TOKYO - Nissan shares skyrocketed as much as 12 per cent on Monday as investors cheered the company's share buyback, after a bloodbath on equity markets at the start of the year hammered the stock.

Japan's number two automaker said after the Tokyo market closed on Friday that it would purchase up to 400 billion yen ($4.95 billion) worth of its own shares by the end of the year.

In response, Nissan's Tokyo-listed shares soared the most in seven years, according to Bloomberg, with the stock trading at 1,091.5 yen shortly after the start of trade Monday.

The buyback, announced after a board meeting, will start on Monday and run until December 22, it said.

Share buybacks tend to lift the value of existing stock.

The process will not lead to any "material change" in the shareholding balance in Nissan's alliance with French partner Renault, it added.

Separately, Renault said that it would sell Nissan shares as part of the programme to maintain its current 43. 4-per cent stake in Nissan, which in turn owns 15 per cent in the French automaker. The pair have had a business tie-up since the late nineties.

Renault shares closed more than five per cent higher on the Paris exchange Friday, which was open at the time of the announcement.

Renault-Nissan alliance chief executive Carlos Ghosn said the decision to return cash to shareholders was prompted by the group's strong cash flow position.

"Returns to shareholders is one of Nissan's key objectives," he said in a statement.

The announcement comes after Nissan shares took a beating since the start of the year as concerns about the global economy hammered equities. On Friday, the stock was down about 24 per cent since January.

But the firm's earnings have been upbeat.

Nissan's net profit for April-December jumped nearly 34 per cent from a year earlier to 452.8 billion yen, despite weakness in Japan and emerging markets.

Its moves in recent years to make investments and boost factory output in emerging markets - top vehicle market China, Mexico, Brazil and Thailand - have put it now in a position to free up cash for buying back shares, analysts said.

However, "many uncertainties" remain over the outlook for emerging markets, warned Masayuki Kubota, chief strategist at Rakuten Securities in Tokyo.

"Nissan is quite aggressive to make investments in emerging countries, but these days the economic situation is unstable," Kubota told AFP.

The outlook for "China is not good, and the influence of China's economy on some Southeast Asian countries is quite big", he added.

"In this situation, for Nissan - which has a strong balance sheet - a share buyback is a good choice." Renault-Nissan is the world's fourth-biggest car maker with 8.53 million unit sales in 2015.