Firstly begun in 2019, the Shanghai-London Stock Connect trading link allows Chinese issuers to sell thorugh GDR route in London. The latest deal is China allowing both Germany and Switzerland to join the establishment of European capital markets ties. This eligibility leveraged the criteria for Shenzhen-listed companies.
Two Shanghai-listed companies, Keda Industrial Group and Ningbo Shanshan opened the Swiss GDR route. This is after the two companies raised $173m and $319m. Plus, there are two companies following this instrument. GEM and Gotion High-tech, the Shenzhen-listed, also had $346m and $685m respectively.
However, based on the people in the deals route, the securities should aim at foreign investors. But those who bought them were Chinese and strategic investors. From the listing price of $12.28, GEM’s GDRs closed at $13 which is above 5.9%. This is with around 12.000 GDRs. The total of sold GDRs in the listing is 28.18m. To elaborate more, GEM’s first day volume comprised 0.04% of the shares offered. In a nutshell, there were only six traders present in the four hour trading.
Keda is different from many other companies. It is the only building materials machinery manufacturer. The other three on the other hand, are the electric vehicle sector. GEM provides recycling materials such as cobalt and nickel. Gotion High-tech is the producer of lithium-ion batteries, the same with Shanshan, the maker of battery materials. However, the tight discounts and long lock-ups are not the best way to attract foreign investors. Because the Chinese regulations allow 10% GDR offering. This is the 20-day average in the closing price when the deal is launched.