2023-07-06 08:55:03
There are now 14 Chinese companies listed on the Swiss Stock Exchange and around thirty are ready to follow suit. But the initial enthusiasm has died down, while the daily trading volume of the new class of securities is almost nil.
Investors seem to be making great use of the fungible nature of the securities, convertible into Chinese Class A shares following three months.
A little less than a year following the start of the Stock Connect project, which allows Chinese companies listed in Shanghai or Shenzhen to issue certificates of deposit (“global depositary receipt”, GDR) in dollars in Switzerland, l activity has still not taken off. If the securities issued have found takers, it is invariably the same scenario that is repeated every day on the Stock Exchange on the specific segment, whose trading is open between 3 p.m. and 5:20 p.m.: the volume is zero.
“We’ve run into this situation quite often with dual-listed companies,” Mandy Zhu, UBS’s China offshore business manager, told AWP. “With regard to the securities in question, investors prefer to hold them and then convert them into A shares, a category that comes with increased benefits, following 120 days. This explains the low trading volume of GDR.”
“We found that most investors are converting their GDRs into A-shares, as A-shares are, so far, more liquid than GDRs,” Ms. Zhu confirms, noting that fungibility helps alleviate investor concerns. regarding liquidity.
In mid-May, the Chinese Securities Regulatory Commission (CSRC), stock market watchdog of the Middle Kingdom, also published directives, setting new conditions for companies that would be tempted by the Zurich adventure. Thus, if SIX requires a share capital of only 25 million francs, the Shanghai Stock Exchange now requires for candidate companies a capital of at least 20 billion yuan, or 2.6 billion francs, summarize in a comment the analysts from the Sino-Swiss law firm Wenfei in Zurich.
Thus, out of the 14 companies having benefited from the new Stock Connect mechanism, one, Zhejiang Hangke Technology, listed in Shanghai, does not meet the new criterion with its share capital of 18.3 billion yuan. With 21.1 billion, Keda Industrial Group is not very far from the limit.
Stricter conditions
“The number of issuances might decrease as the requirements for eligible issuers are now stricter,” admits Ms Zhu, who however believes that GDRs are a good way for listed companies to raise capital in Europe. “We believe there will be new applicants despite the new guidelines.”
In March, some 30 Chinese companies had nevertheless announced that they would use the mechanism on European markets, 90% of them in Switzerland, indicated on June 7 Christian Schneiter, partner of the law firm Vischer, on the occasion of an event organized by the Swiss-Chinese Chamber of Commerce.
The requirements also relate to the activity of candidate companies, which must now correspond to the objectives of Beijing’s industrial policies. Interested companies must also demonstrate their need to expand their business abroad. But so far, the newcomers to the Swiss Stock Exchange have been particularly poor in communication with investors and have not revealed any concrete projects in Europe.
“We encourage GDR issuers to engage more with international investors, including Swiss investors,” said Ms. Zhu, noting “a strong participation of international investors in most of the GDRs that UBS manages”. .
This article has been published automatically. Source: ats/awp
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