China's biggest overseas-traded technology companies from search giant Baidu to Sogou are investigating ways to float shares on the country's exchanges as Beijing encourages its largest corporations to move their listings home.
Chinese enterprises have long pursued the prestige and capital associated with marquee overseas debuts. But technology businesses from Alibaba Group Holding to Tencent Holdings have in recent years outstripped their old-economy peers to become the nation's largest, and virtually none is traded domestically.
Market regulators are now pushing the industry to package Chinese Depositary Receipts or CDRs -- similar to American Depositary Receipts -- for Chinese investors, Beijing-based media group Caixin reported.
A depositary receipt is a negotiable certificate issued by a bank and represents a specified number of shares in a foreign stock traded on an exchange. The underlying security is held by a financial institution.
Smartphone maker Xiaomi is said to be considering a mainland listing as part of a much-anticipated 2018 coming-out party. Baidu Chief Executive Officer Robin Li, Sogou's Wang Xiaochuan and Yao Jinbo, founder of the Craigslist-style service 58.com Inc., have separately declared their ambitions of listing their companies on Chinese stock markets when regulations permit the creation of Chinese Depositary Receipts. Last week, prominent entrepreneur and NetEase Inc. CEO William Ding joined the movement.
"After 2005, when we listed in America, we immediately communicated with the China Securities Regulatory Commission," said Li, who was attending the annual, tightly scripted Two Sessions meeting of political bodies in Beijing. "We've always had a dream to be listed back in China."
Enticing mega-corporations to list at home will help burnish the reputation of China's twin markets in Shanghai and Shenzhen, notorious for spotty regulation, volatility and periodic government intervention. It could also offer a major valuation boost thanks to the appetites of individual Chinese as well as local funds, who have few tech alternatives and face investment restrictions abroad. Decamping from America and listing in China helped 360 Security Technology reap a huge increase in market capitalization that greatly enriched CEO Zhou Hongyi.
The local courtship however coincides with an effort by neighboring Hong Kong to rework its regulations to enhance its attraction to the tech sector. And it's unclear how advanced mainland Chinese regulators are in creating a framework for depositary receipts, or what they envision specifically.
JD.com Inc. CEO Richard Liu has said that any listing of his logistics business may encompass mainland China. Sogou, which only recently listed in the U.S., operates mainly in China and could thus benefit from a local listing, CEO Wang Xiaochuan said. "We strongly hope to return to the A-share market, and we hope the policies will change," he said.
The A-share market refers to stock traded only on the two Chinese exchanges.
Yao, CEO of $11 billion Web classifieds company 58.com, echoed that sentiment.
"Right now we're all discussing how the A-share market can support the internet industry," Yao told reporters in Beijing. "We, too, hope to have the chance to 'return to the market."
SundayMonday Business on 03/11/2018