China is Failing: Chinese Businesses Turn to the West to Survive

While the Hong Kong Stock Market (HKEX) recorded a record low investment in IPOs, Chinese A-share businesses have begun to list in Swiss.

The Weak IPO Industry in Hong Kong

During the first quarter of 2022, the HKEX had a 27 percent loss in revenue and an 18 percent decrease in sales and other earnings, compared to the same timeframe last year, according to its most recent interim data.

Its IPO fundraising plunged, falling 91 percent annually from HK$211.7 billion (about $27.5 billion) to HK$19.7 billion (approximately $2.6 billion).

HKEX dropped out of the top five international IPO fundraising markets as a consequence of its historically low investor confidence in the first half of 2022.

Hong Kong emerged as the top IPO site in the world seven times in the last 13 years, while its lowest position was fourth in 2012 and 2021.

The performance of HKEX has been impacted by the IPO market decline. The core business income was down 11% from the initial half of 2021, according to the interim 2022 figures.

The decrease in income is because of “lower Headline ADT and lower banking costs from e-IPO filings,” as well as “lower trading and clearing fees.”

According to the World Federation of Transactions, average daily turnover (ADT) is determined by dividing the total amount of stock trading by the number of days throughout the year.

Headline ADT denotes ADT’s HKEX trading.

However, HKEX remains to be “the leading choice for return IPOs amid rising uncertainties for Chinese businesses to be listed in the U.S.,” as per Chinese state-owned economic news outlet CLS.

Swiss Companies List of Chinese Companies

Four Chinese A-share firms released Depositary Receipts (GDRs) in Switzerland in July, (also called Swiss GDRs). Since then, other Chinese businesses have raised money abroad in a similar manner.

A GDR is a certification issued by a bank that represents shares in a multinational stock traded on two or more international exchanges, according to Investopedia.

On June 28, the four Chinese businesses raised $1.6 billion by selling their Swiss GDRs. These businesses are Gotion High-tech, Keda Industry Group, Ningbo Shanshan, and GEM.

As per SIX Swiss Exchange, “the current regulatory system for GDRs was reviewed, updated, and brought into force on July 25, 2022” in order to enable Chinese businesses to list GDRs in Geneva (SIX).

According to a story published on August 19 by the Chinese state-owned Securities Daily, nine Chinese businesses are now submitting applications to list Swiss GDRs.

Join Care Pharmaceuticals and Lepu Medical Technology already gained provisional permissions from SIX.

Albert Song, a writer on current affairs and authority on the Chinese financial system, said to The Epoch Times that Chinese businesses seek international finance mostly to raise money and increase their influence abroad in reaction to the Swiss GDR trend for Chinese businesses.

This article appeared in Conservative Cardinal and has been published here with permission.