Chinese issuers were the biggest issuers of depositary receipts this year, as their appetite for capital increased despite mounting political tensions with its trade partners.
Mainland-based issuers collected US$6.1 billion in capital through the sale of American depositary shares (ADSs) and global depositary receipts (GDRs), or more than two-thirds of the fundraising in the first half, Citigroup said in a report published last week.
About US$4.9 billion of the total US$8.8 billion came through initial public offerings (IPOs) while the balance was raised from follow-on share sales. Despite the large presence of Chinese issuers, the amount of money raised was 25 per cent lower than a year earlier.
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The capital raising activity shows “that this structure remains an attractive vehicle for issuers”, Scott Pollak, global head of depositary receipt services at Citigroup in New York, said on Monday.
Apart from depositary receipts, Chinese companies wishing to raise foreign-currency capital have tended also to sell shares in Hong Kong. Mainland Chinese firms collected more than 90 per cent of the US$11.2 billion in proceeds from 54 IPOs in Hong Kong from January to June, according to data compiled by Deloitte and Refinitiv.
Chinese issuers have continued to access overseas markets while US-China relations sank to their lowest point in decades due to a broad range of issues, including the source of the coronavirus outbreak, trade tariffs and national security concerns, among others.
Most notably, a slew of Tesla challengers such as Xpeng, Li Auto and NIO have been among the most aggressive issuers, as they look to build up their cash hoards to expand their facilities and take on the Palo Alto, California-based carmaker for a slice of China’s market for new energy vehicles.
China’s Tesla challengers, Xpeng and Li Auto, rev up capital-raising drive as the electric car start-ups target US IPOs
Sales of depositary receipts were generally well received even though Chinese issuers faced the risk of delisting amid pressure from lawmakers and regulators to gain access to auditing works at Chinese companies.
The US State Department has also asked American colleges and universities to divest their holdings in Chinese companies, warning of the potential for “wholesale delisting”. Recently, the Trump administration has also taken action to curb the operations of WeChat and TikTok in the US.
Chinese companies have stepped up their fundraising through the mechanism this quarter. They took in almost US$7 billion of proceeds from January to September 9, or double the volume in the same period last year, according to data compiled by Refinitiv.
The two largest overseas fundraising activities this year came from China Pacific Insurance Group, which sold US$1.9 billion of GDRs in London in June. Real estate platform operator Beike Zhaofang raised US$2.12 billion in August in New York.
More from South China Morning Post:
- Li Auto electrifies Nasdaq with US$1.1 billion IPO, the largest by a Chinese company in the US since 2018
- Xiaomi-backed Tiger Brokers taps investor frenzy for Chinese tech IPOs in US
- Chindata, iHuman join string of Chinese companies fundraising in US
- Hong Kong stocks fall most in two months amid simmering US-China tensions as HSBC slumps to lowest since 2009
This article Chinese companies power sale of depositary receipts despite mounting US political, trade tensions first appeared on South China Morning Post