Date
17 October 2017
A replica of Wall Street's charging bull statue is installed on the Bund in Shanghai. The government is worried that the return of US-listed Chinese companies will suck in liquidity from smaller firms. Photo: Bloomberg
A replica of Wall Street's charging bull statue is installed on the Bund in Shanghai. The government is worried that the return of US-listed Chinese companies will suck in liquidity from smaller firms. Photo: Bloomberg

CSRC mulls curbs on backdoor listings by returning Chinese firms

China’s stock regulator is considering measures to curb the flow of overseas-traded Chinese companies seeking backdoor listings in the domestic equity market, Bloomberg reports, citing people with knowledge of the matter.

The China Securities Regulatory Commission is weighing possible restrictions on reverse mergers, including capping valuation multiples for deals involving companies that previously traded overseas, the sources said.

Another option being discussed is introducing a quota to limit the number of reverse mergers each year from companies formerly listed on a foreign bourse, the report said.

The CSRC is concerned that the valuations mooted for some domestic backdoor listings are too high and could affect the stability of the stock market.

The government also wants to avoid encouraging more buyouts that could prompt a wave of fund outflows and further depreciate the Chinese currency.

At least 47 Chinese companies listed in the United States have received buyout offers totaling US$42.6 billion since the start of last year, lured by the prospect of relisting at a higher valuation in Shanghai or Shenzhen, according to Bloomberg data.

Any new regulations could affect companies like US-listed security software maker Qihoo 360 Technology Co. Ltd., whose US$9.3 billion buyout is still pending after it signed a definitive deal agreement in December.

“The A-share market has not stabilized yet, and the government is worried that the return of companies with stronger brand names will suck in a lot of liquidity from smaller companies,” Ronald Wan, chief executive of Hong Kong-based Partners Capital International, was quoted as saying.

“They are very cautious and sensitive to anything that will affect stability in the market at the moment.”

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