January 27, 2022

China unveils plan for overseas-listed tech giants to float shares back home

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From Asian Review NIKKEI

SHANGHAI (Dow Jones) — The Chinese government on Friday unveiled a pilot plan to encourage qualified companies in select industries to float shares on its domestic stock market, paving the way for the country’s technology giants to list at home.

Overseas-listed Chinese companies in advanced technology sectors with market capitalizations of at least 200 billion yuan ($31.9 billion) can return to China’s yuan-denominated stock market by selling shares or issuing financial instruments called Chinese Depositary Receipts, according to a statement from the China Securities Regulatory Commission. The announcement was made after markets in China closed.

The plan is aimed at luring companies such as Alibaba Group Holding Ltd., Tencent Holdings Ltd., Baidu Inc. and JD.com Inc. back home. Alibaba and other companies were previously barred from listing their shares domestically because they were incorporated overseas. Tencent is listed in Hong Kong while Alibaba, Baidu and JD.com are listed in New York. The four companies are domiciled in the Cayman Islands.

Internet giant Alibaba, which has a market value of $470 billion and went public on the New York Stock Exchange in 2014, has been working on a plan to list in China as soon as this summer. A spokeswoman for the company previously said Alibaba has long considered listing its shares domestically if regulations would permit it. Chinese smartphone maker Xiaomi Corp., meanwhile, is planning to go public in Hong Kong later this year and may also list its shares in China via depositary receipts, the Journal previously reported.

Chinese authorities are eager to welcome back homegrown tech champions in order to give retail investors a chance to tap into heady tech stock profits. Shares of Tencent and Alibaba have risen 83% and 68% respectively from a year ago, while Baidu and JD.com have each increased over 22%.

A total of 15 overseas-traded Chinese companies had valuations exceeding the $31.9 billion market capitalization threshold as of last week, according to data from Wind Information Co.

Meanwhile, private tech companies with revenue of at least 3 billion yuan (US$478 million) in the past year would also be allowed to go public on the Shanghai and Shenzhen if their estimated valuation is at least 20 billion yuan (US$3.19 billion), the securities regulator said. This could include firms that have yet to turn a profit.

The CSRC said it will set up a committee to select qualified companies from sectors that fit with national strategies and possess core technologies in sectors including Internet, big data, cloud computing, artificial intelligence, software and integrated circuit, high-end manufacturing as well as biotechnology.

The pilot plan for allowing innovative companies to list domestically through public share offerings or the issuance of Chinese depositary receipts was approved by the State Council, China’s cabinet, on March 22.

The plan could prove to be a boon for Chinese companies listed outside of China that qualify to list their shares back home. Stocks on the mainland tend to trade at higher valuations than in other markets, and access to local investors could also make it easier for the companies to raise additional funds by selling shares.

There are risks, however. China’s stock market is largely driven by retail investors, and has been prone to large swings during times of stress in previous years. In addition, depositary receipts typically confer limited rights to their holders. Many technology stocks have also suffered sharp declines in recent weeks, saddling investors with losses.

IMAGE: © Reuters

For more on this story go to: https://asia.nikkei.com/Politics-Economy/Policy-Politics/China-unveils-plan-for-overseas-listed-tech-giants-to-float-shares-back-home?page=1

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