GDR regulatory policies are tightening! Since June, 7 A-share companies have terminated their issuance plans. Will this trend continue?
By Liu Chenguang LCG
Drew Bernstein, co-founder and co-chairman of Marcum Asia, looked at new regulations affecting Chinese global depository receipts (GDRs) that allow trading of Chinese stock on overseas markets. These new policies examine the amount of funds to be raised and whether their investment purpose is consistent with the company’s core business activities and industrial policies.
Bernstein said that for A-share listed companies, GDRs are a very attractive tool to enter international stock markets. Concerns that hedge funds or domestic investors will use them as a means of domestic stock arbitrage, which could be destabilizing for prices, will likely lead to more stringent scrutiny in the future. The GDR listing market is expected to develop in a more cautious manner going forward.