Huatai Securities gets green light for GDR issue on London bourse

Chinese brokerage expects to raise up to $2.02b from the issuance

The long-awaited Shanghai-London trading program between the Shanghai and London stock exchanges is taking a solid step forward with the first Chinese company obtaining approval from the UK authorities to issue global depository receipts at the London bourse.

Nanjing-headquartered Huatai Securities released an announcement on its official website on Tuesday that it has obtained approval from the Financial Conduct Authority of the United Kingdom regarding the prospectus for the issuance of global depository receipts on the London Stock Exchange.

The price range of the GDRs under the issuance is preliminarily set between $20 and $24.5 per GDR. The offer period of the GDR is scheduled between June 11 and 14, London time.

Assuming the maximum number of GDRs under the proposed issuance and full exercise of the over-allotment option, Huatai expects that the gross proceeds from the issuance will reach between $1.65 billion and $2.02 billion.

The brokerage firm announced last September it would issue GDRs on the main market of the London bourse, and became the first Chinese company with such a plan to participate in the trading program.

Chinese companies' issuance of GDRs is an important part of the Shanghai-London Stock Connect mechanism which was initiated by the municipal government of Shanghai in late 2015. Under this trading program, London-listed companies will be able to issue Chinese Depository Receipts on the Shanghai Stock Exchange.

Zheng Yang, director of the Shanghai Financial Services Offices, said at a news conference in February that the stock connect is expected to start running within the year.

Shanghai Stock Exchange, where Huatai Securities is listed in the A-share market, replied in a public letter released on its official website late Tuesday that the successful issuance of Huatai's GDR in London will help Chinese institutions better integrate into the international capital market and strengthen cooperation between the two financial hubs of London and Shanghai.

With the guidance and support of regulators, more A-share listed companies will be able to land in the London capital market. At the same time, the London-listed companies willing to develop together with China will be offered the chance to go public at the Shanghai bourse.

Liu Min, an analyst with global foreign exchange trade platform FXTM, said Chinese companies listed overseas will be able to seek more financing and develop at a faster pace by issuing GDRs. The Chinese companies will also be able to build their brand image and explore overseas business, she said.

The Shanghai-London trading program will facilitate communication between multinational companies in China and the United Kingdom. Those issuing CDRs in Shanghai will benefit from China's economic reform, added Liu.