Shanghai exchange hints at sale of global depositary receipts by Chinese companies in Switzerland
The Shanghai Stock Exchange will embark on a project that could see the inaugural sale of global depositary receipts (GDRs) in Switzerland by Chinese companies, according to a senior bourse official, amid growing US-China tensions.
“We are preparing to make important efforts in Switzerland
going forward and we believe that the first batch of the trial will succeed
this year,” Cai Jianchun, general manager of the Shanghai exchange, said in a
panel discussion at the Boao Forum in Hainan.
Cai did not elaborate on his statement. The deputy chiefs of
the Chinese regulators overseeing the stock market and foreign exchange were in
attendance.
The comment, however, is widely interpreted as a follow-up
to a memorandum of understanding between the Shanghai and Swiss exchanges in
2019. The two sides had agreed to study the feasibility of allowing the listing
of securities including GDRs on each other’s market. Other possible areas of
cooperation included digitalisation.
A link-up with the Swiss exchange would be the third
cross-border plan by the Shanghai exchange, which is the biggest in Asia based
on the 46 trillion yuan (US$7.1 trillion) of stock capitalisation. It is seen
as China’s continuing effort to open up its markets to foreign investors. The
local exchange currently has “stock connect” programmes with Hong Kong and
London.
The Shanghai-Hong Kong linkage has become a pivotal conduit
for two-way flow of capital in and out of mainland China since its inception in
2014.
A Shanghai-London connection, however, has progressed more
slowly, partly because of diplomatic rows with Britain over Hong Kong, the
Covid-19 pandemic and other issues. Companies including Huatai Securities and
China Pacific Insurance have sold about US$6 billion worth of GDRs through the
link since 2019.
Diversifying sources of overseas financing for Chinese
companies is critical for Beijing at a time when the US is heightening the
scrutiny of auditing results that could lead to the delisting of the nation’s
biggest technology companies from American exchanges.
Many US-traded Chinese companies are hedging the risk by
making secondary stock offerings in Hong Kong. The latest is travel and
ticketing firm Trip.com, which joins a list that includes Alibaba Group
Holding, JD.com and Baidu.
Serving technology innovation has been at the top of the
agenda of the Shanghai exchange, Cai added during the Boao panel discussion.
Since its inception in 2019, 262 companies had raised a combined 340 billion
yuan on its Science and Technology Innovation Board, known as the Star Market,
through March this year.
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