25 June 2019
China's securities regulators could give domestic investors access to overseas-listed Chinese tech giants via depositary receipts. Photo: Bloomberg
China's securities regulators could give domestic investors access to overseas-listed Chinese tech giants via depositary receipts. Photo: Bloomberg

China plans new share issue option to bring tech giants home

China may allow its offshore-listed tech giants to sell a form of shares on the mainland, Reuters reports, citing people with knowledge of the plan.

The move would pit Shanghai and Shenzhen against Hong Kong in the battle to host the country’s tech giants, the news agency said.

While China is home to some of the world’s biggest tech companies, most are listed offshore, including Alibaba Group Holding Ltd., Baidu Inc., Inc., and Tencent Holdings Ltd. (00700.HK).

Plans being considered by China’s securities regulator could give Chinese investors access to those and other companies via depositary receipts, the people said.

Depositary receipts – common in the United States and other countries – are not technically shares, but certificates that allow investors to hold shares listed elsewhere.

The planned move forms part of efforts by Beijing to counter the threat of a large number of its local technology companies opting for New York or Hong Kong listings instead of their home market, one of the people said.

Hong Kong, home to Tencent’s listing, is currently working on rules that would allow the likes of US-listed Alibaba to take up a secondary listing in the city in an effort to draw interest in such headline-grabbing stocks, and the trading commissions and fees they generate, closer to home.

Meanwhile, Bloomberg reported that several of these overseas-listed tech giants, including Baidu Inc. and Sogou Inc., are investigating ways to float shares on China’s exchanges, as Beijing encourages its largest corporations to bring their listings home.

Smartphone maker Xiaomi Corp. is said to be considering a mainland listing as part of a much-anticipated “coming-out party” this year, the report said.

Among those who have declared their intentions to list their companies in China are Baidu chief executive Robin Li, Sogou’s Wang Xiaochuan, Yao Jinbo, founder of the Craigslist-style service Inc., and Netease CEO William Ding, the financial news service said.

The guidelines for China depositary receipts (CDRs), similar to American depositary receipts, are likely to be finalized in the second half of this year by China’s securities regulator, Reuters said, citing its unnamed sources.

The China Securities Regulatory Commission (CSRC) will start accepting CDR applications from interested firms toward the end of the year, the sources said.

The CSRC plans to first encourage the overseas-listed Chinese technology companies to issue CDRs to local investors, with an aim to woo global technology giants later, one of the sources told Reuters.

“We’re seeing a shift in regulators’ attitude toward tech stocks, and that could lead to change in the investment landscape,” said Wu Kan, head of equity trading at Shanshan Finance.

The Shanghai Stock Exchange said on Friday it would support the growth of a new generation of companies, while local media cited the Shenzhen bourse as saying over the weekend it was creating conditions for so-called unicorn companies – startup companies valued at more than US$1 billion – to list.

Financial magazine Caixin first reported the planned CDR move on Monday.

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