Photo taken on July 22, 2019 shows the debut ceremony of China's sci-tech innovation board (STAR market) at the Shanghai StockExchange in Shanghai, east China. (Xinhua/Fang Zhe)
BEIJING, Nov. 10 (Xinhua) -- The Global Depository Receipts (GDR) becomes increasingly popular in capital market as a new tool for companies of A-shares in cross-border financing, and an increasing number of companies have issued GDRs in European market.
Eastmoney (300059.SZ) has recently announced its plan to issue GDRs and filed an application for listing on the SIX Swiss Exchange. On October 9, Zhongding Group (000887.SZ) issued a reminder statement for GDR issuance and going public on the SIX Swiss Exchange. Eastern Shenghong (000301.SZ) and Senior (300568.SZ) also declared that their applications for GDR issuance were accepted by the China Securities Regulatory Commission (CSRC) on October 10.
The issuance of GDR will help listed enterprises broaden overseas financing channels, expand their overseas businesses and raise the popularity.
As more and more A-share companies conduct cross-border operations, securities firms also face surging opportunities to launch their overseas business. Guotai Junan Securities (601211.SH) has submitted the files to establish a sub-branch in Europe and put the file on record at the CSRC.
-- Listed companies ready to issue GDR
In February this year, the CSRC released a guideline to upgrade the cross-border capital scheme Shanghai-London Stock Connect into China-Europe Stock Connect, which would further facilitate China’s cross-border investment and financing and advance high-quality opening-up of capital market.
Among securities companies, after Huatai Securities (601688.SH) issued GDRs at the London Stock Exchange under the Shanghai-London Stock Connect scheme in 2019, Eastmoney planed to issue GDRs as well. The additional amount of A-shares represented by the GDRs will not exceed 661 million and 5 percent of the company's total ordinary share capital before the issuance.
In the short term, GDR issuance will dilute the equity and Return on equity (ROE) of Eastmoney and impact stock price. In the long run, however, GDR issuance is expected to attract long-term overseas investors and optimize the company's equity structure to raise overseas funds and expand global market, said Zhang Jingwei, chief analyst in the non-banking industry at Essence Securities.
At present, six listed companies such as GEM (002340.SZ), Guotion Hi-Tech (002074.SZ), Joincare (600380.SH) have issued GDRs for listing on the SIX Swiss Exchange since 2022, Wind's data showed.
GDRs issued by China Pacific Insurance (601601.SH), Yangtze Power (600900.SH), Huatai Securities (601688.SH), Mingyang Smart Energy (601615.SH), and SDIC Power (600886.SH) have also been listed on the London Stock Exchange.
-- GDR promotes listed companies to expand overseas markets
"It takes about four to five months for enterprises to plan the GDR issuance and listing, which is attractive to listed companies that need to raise funds in a short term. In addition, GDR issuance is conducive to gain companies' popularity," a senior executive of a listed company told a reporter from China Securities Journal.
Zhongding Group (000887.SZ) pointed out in the announcement that the purpose of GDR issuance is to promote the strategic planning around the world, enhance the core competitiveness in global management, optimize capital structure and boost the intelligent and digital transformation of the company.
It is noted that after A-share companies issue GDRs and go public on the SIX Swiss Exchange, GDR investors will not be regarded as different from company stockholders and have little impact on company governance cost.
Besides, GDR is not only an important step for Chinese companies to further integrate into the international capital market, but also facilitates securities companies and investment banks to expand their international business.
GDR issuance can serve as a cross-border financing channel and bridge connecting the capital markets of China and Europe to bring more overseas strategic investment for the listed companies and reach more international cooperation, said Sun Lijun, co-head of global investment banking of UBS Securities.
-- GDR facilitates securities companies’ business in Europe
As more and more Chinese companies actively participate cross-border operations, securities firms also face surging opportunities to launch their overseas business in European market.
"It is necessary for Chinese securities companies to increase their presence in the European market as the market is becoming increasingly attractive to Chinese investors with multi-level capital structure," Chuancai Securities chief economist Chen Li told the reporter.
On October 28, Guotai Junan (601211.SH) received an official reply from the CSRC that the establishment of its subordinate company in London was approved, which marks a key move for the company to promote global layout in European market.
CITIC Securities (600030.SH) said that they have experience and expertise in GDR issuance, and they will give full play to the leading edge in the European capital market and actively contribute to the interconnection of the Chinese and European capital markets.
However, as the further opening-up of the capital market has brought flowing overseas resources, securities companies have to face greater competition at the same time, which posed severe test for their capacity in conducting cross-border business.
(Edited by Tian Shenyoujia with Xinhua Silk Road, tianshenyoga0524@163.com)
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