China's leading securities brokerage Huatai Securities issued a notice on Tuesday, stating that it is to launch the nation's first Global Depository Receipt (GDR) on a global scale and list on the London Stock Exchange, targeting qualified international investors.
GDR, the global equivalent of the original American Depository Receipts (ADR), is a general name for a depository receipt where a certificate issued by a depository bank, which purchases shares of foreign companies, creates a security on a local exchange backed by those shares. It can overcome the inconveniences of foreign investors in stock trading, dividend distribution, share allotment and exercise of rights.
It could be taken as the first GDR under the long-awaited London-Shanghai Stock Connect, a mechanism for the interconnection between the Shanghai and London Stock Exchanges, via which eligible listed companies can issue depository receipts and trade on the other side's market.
Huatai Securities aims to raise at least 500 million US dollars via issuance of GDR in the British capital to boost working capital for domestic and overseas expansion, as a way to further optimize the company's business layout, enhance market competitiveness and anti-risk capability.
The underlying securities of A shares represented by the GDRs issued this time do not exceed 8.2515 billion shares and are no more than 10 percent of the total share capital of the company's common stocks before the issuance. In the other hand, the face value of each GDR will be determined based on the conversion rate of the issued GDR and the underlying A shares.
The Huatai plan was unveiled roughly one month after regulators published draft rules for the Shanghai-London Stock Connect scheme.
Under the draft rules, companies listed in the two cities can apply for flotation on each other's exchanges through the issuance of depository receipts (DRs).
Huatai Securities was established in 1991 and listed on the Shanghai Stock Exchange in 2010. Among the 2017 brokerage net assets rankings announced by the Securities Association of China, a self-regulatory organization for securities industry in the country, Huatai ranked fourth with a net asset of 85.101 billion yuan.
Besides, in the latest rating of the securities industry by China Securities Regulatory Commission, functional equivalent of the Securities and Exchange Commission (SEC) of the US, Huatai Securities is rated AA grade.
(With inputs from Reuters)