Four Shanghai-listed companies have listed on the a Swiss Exchange in Zurich.The companies issued global depository receipts (n a program based on the 2018 Shanghai-London Stock Connect.
Photo from CFP
By LIU Chenguang
Until recently, America was the place for Chinese companies to go public abroad, but an increasing number of them are now looking to Europe. On July 28, four Shanghai-listed companies – Keda Industrial Group (construction material manufacture), Ningbo Shanshan (lithium battery maker), GEM (battery recycling) and Gotion High tech (car battery maker) – have listed on the SIX Swiss Exchange in Zurich. At least six other companies are waiting to be approved by the Swiss bourse.
The four companies raised between US$173 million (1.17 billion yuan) and US$685 million through global depository receipts (GDR) - certificates issued by custodian banks that represent the companies’ shares that can be converted into shares traded in Shanghai.
The listings were the result of a program based on the 2018 Shanghai-London Stock Connect, which allows companies listed on one exchange to offer GDR on the other. Five companies have been listed in London in this way. The program was expanded this February to include Germany, Switzerland and Shenzhen.
XU Jia, of CICC, said the stock programs are a good way for Chinese companies to access the European capital market, which will help them improve corporate governance and build better international outreach.
Chinese companies tend to trade at lower PE ratios abroad, said Wang Hongying, director of the Institution of Financial Derivatives. But more are seeking to go public abroad, or try to be listed in more than one market, given the current IPO approval log jam and a tepid financial market.
A number of factors can influence a company’s decision on where to list. American exchanges have become less appealing as a result of the audit standoffs between the United States and China. European regulators are friendlier, and Chinese companies believe they can get better valuations in Zurich than in Frankfurt or London. The Swiss market is also favored because of the country’s strong currency and relative resilience to the Euro zone’s economic troubles.
Some of the companies that are already listed in Zurich or waiting for approval already do business in Europe and plan to expand their presence there.
Drew Bernstein, co-chairman of accounting and advisory firm Marcum, pointed out that Hong Kong and Singapore remain attractive. If a Chinese company wants to be listed abroad, it is still likely to choose Asia or the US rather than Europe.
The stock connect program also allows European companies to list in China, something which has not happened yet. The CICC predicts that changes in both the scope of the program and listing requirements will help integrate China’s financial system into the global market.
