General

With the increasing opening of China's capital market and the increasingly complete institutional rules, more and more Chinese companies are going to overseas listing and financing. GDR (Global Depositary Receipt) is one of the important ways.

On the 23rd, Keda Manufacturing Co., Ltd. (hereinafter referred to as Keda Manufacturing) announced that the company had recently received the relevant approval issued by the China Securities Regulatory Commission. According to the approval, the China Securities Regulatory Commission approved the company to issue GDRs with no more than 100 million new A-share base stocks, and according to the conversion ratio determined by the company, the number of GDRs issued should not exceed 20 million. Following the completion of this offering, the company can be listed on the SIX Swiss Exchange.

The so-called depositary receipts refer to securities issued by depositors, issued in China on the basis of overseas securities, and representing the rights and interests of overseas underlying securities.

Generally speaking, depository receipts can be divided into GDRs and CDRs (China Depository Receipts). Among them, GDR allows qualified companies listed in Shanghai and Shenzhen to issue DR (referred to as "westbound business") on the prescribed overseas exchanges; while CDR allows qualified overseas issuers to issue DR on Shanghai and Shenzhen exchanges (referred to as "eastbound business") ”).

In February this year, the China Securities Regulatory Commission officially issued the Regulations on the Regulation of the Interconnected Depository Receipt Business of Domestic and Foreign Stock Exchanges, expanding westward business to Switzerland and Germany. Since then, Switzerland has become a popular listing destination.

According to media statistics, including Keda Manufacturing, nine A-share listed companies have announced plans to issue GDRs since the beginning of this year. Of these, eight target exchanges in Switzerland. Specifically, in addition to Mingyang Smart’s choice of destination as London, 8 companies including Sany Heavy Industry, Lepu Medical, Guoxuan Hi-Tech, Shanshan Co., Ltd., Keda Manufacturing, Fangda Carbon, GEM and Joincare all chose Switzerland.

Why does Switzerland become a "sweet pastry"? Dong Dengxin, director of the Institute of Finance and Securities at Wuhan University of Science and Technology, said in an interview with a reporter from China News Agency on the 23rd that Switzerland, as the world's leading financial center, has a relatively mature financial environment and capital system, and a higher degree of market openness and fairness. All of them provide convenient conditions for Chinese listed companies to go to Switzerland for listing and financing, so they are more attractive.

In this regard, Sun Lijun, co-head of the global investment banking department of UBS Securities, said that compared with exchanges in other European countries, the valuation of listed companies on the Swiss Stock Exchange is relatively high, so that Chinese companies go to Switzerland to issue, and the impact of the valuation difference will be even greater. smaller.

In response to the question of why more and more Chinese companies choose to issue GDRs, Dong Dengxin said that compared with overseas IPOs (initial public offerings), GDR issuance has its unique advantages. Although GDR is the same international issue as overseas IPO, considering that the issuer of GDR is a listed A-share company, its credibility is higher. In addition, the review of GDR issuance is also very standardized and mature, and the workload and execution cycle involved are also less than those of overseas IPOs, and the total cost is lower than that of overseas IPOs.

Dong Dengxin further stated that the issuance of GDRs by Chinese listed companies is conducive to broadening their own international financing channels, improving the level of internationalization and corporate governance of Chinese listed companies, and improving the international reputation and influence of Chinese listed companies.

In this regard, Zhu Zhengqin, head of UBS's investment banking department in China, also holds a similar opinion. Zhu Zhengqin said that the issuance of GDRs can introduce well-known international and domestic investors as shareholders for Chinese companies, make equity more diversified, improve corporate governance mechanisms, and stimulate innovation.