China Wants Swiss GDR Listings Axed

A stock scheme linking China and Switzerland has attracted ire from an unexpected source: Beijing. China’s securities regulator is halting applications from listed firms seeking to sell global depositary receipts (GDRs) in Zurich, Bloomberg reported, Robyn Mak wrote in an analysis.

Photo Insert: Since last year, 11 Chinese companies have raised a combined $3.6 billion by selling GDRs on the Six Swiss Exchange, data from Dealogic show.

Concerns that Chinese investors are buying overseas to make a quick profit at home are valid. In the absence of interest from international institutions, such cross-border stock links serve little purpose.

Since last year, 11 Chinese companies have raised a combined $3.6 billion by selling GDRs on the Six Swiss Exchange, data from Dealogic show. Looser listing requirements and faster approvals have made the bourse an attractive destination for companies seeking US dollars.

At least 30 more firms have announced plans for secondary offerings in Zurich, IFR reported. Contemporary Amperex Technology, the world's largest lithium-ion battery maker, mulls a $5 billion listing in what could be by far the largest Chinese GDR offering in Europe.

These deals have become a get-rich-quick arbitrage for Chinese traders. Most mainland GDRs are sold at a roughly 10% discount to the share price at home, and can be converted into Shanghai- or Shenzhen-listed stock after a 120-day lockup.

Savvy punters with access to foreign funds can make a quick and risk-free profit by shorting the Chinese stock and buying the discounted GDRs. Thus, Swiss shares of Chinese companies barely trade.

Sunwoda Electronic, which raised $440 million in November through an offering at a 16% discount to its Shenzhen stock, said more than half of its Zurich shares have been converted into their mainland equivalent. Gotion High Tech has seen zero turnover in its GDRs since a post-offering lockup expired last year.

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