SIX Swiss Exchange Photo: VCG

A growing number of Chinese companies are accelerating the pace of taking investor orders for their global depository receipts (GDRs) at the SIX Swiss Exchange in Zurich, Switzerland.

Issuing GDRs in European markets has become a trend that will facilitate companies' outbound reach and opening-up of China's capital market. Companies could grasp the opportunity to tap global markets outside the US market as geopolitical tensions make it tougher to raise capital there, experts told the Global Times.

Jiangsu Yuyue Medical Equipment & Supply Co, a medical equipment maker, said in a filing on Monday that the China Securities Regulatory Commission (CSRC) has reviewed its applications regarding a proposed issuance of GDRs and listing at the SIX Swiss Exchange, and decided to accept the application for administrative licensing.

Chinese mobile operating systems company Thunder Software Technology Co said in a filing on Tuesday that it plans to issue GDRs to be listed at the Swiss exchange. The launch will meet the needs of domestic and overseas business development, expand international financing channels, and promote the improvement of corporate governance and core competitiveness, the company said.

A GDR is a bank certificate issued in more than one country for shares in a foreign company. GDRs are most commonly used when the issuer is raising capital in the local market as well as in the international markets. GDRs in China stand for the certificates of A-share stocks traded in overseas markets, denominated in yuan.

Over 40 A-share firms have disclosed plans to issue GDRs and Zurich has become their first choice. Financial institutions have forecast that the momentum of Chinese firms raising funds in European markets via GDRs will rise next year.

Chen Li, chief economist at Chuancai Securities, told the Global Times on Tuesday that for Chinese firms, GDR issues could broaden the channels for overseas financing. The issues could also enhance the competitiveness of Chinese firms in overseas markets.

"It will further promote the two-way opening-up of capital markets. For Switzerland, it is conducive to expanding the scale of the Swiss capital market, enhancing its attractiveness and improving market liquidity," Chen said.

The growing interest of more A-share companies in issuing GDRs in Europe is inseparable from the amended GDR management regulations.

The CSRC said in December 2021 that the Shanghai-London Stock Connect, which allows companies that are listed on one exchange to offer depository receipts on the other, will be extended to include firms listed in Switzerland, Germany and Shenzhen.

GDR issues in Europe provide a good channel for Chinese companies to tap into international capital outside the US, where Chinese firms face increasing pressure amid geopolitical tensions.

Chinese listings in the US halted last year as a result of a sweeping regulatory crackdown. There were 261 Chinese companies listed in the US with a combined market value of $1.3 trillion as of March 2022, according to the US-China Economic and Security Review Commission.

"Given that, we believe the issuance of GDRs in Europe will become a channel for the overseas financing needs of Chinese firms. From a macro perspective, Europe has a relatively complete market structure that could provide different listing methods for overseas companies, which can meet the needs of Chinese firms for efficient listing and financing," Chen said.

Global Times