Although the deals are modest in size compared to the multibillion-dollar New York quotes that Chinese companies previously sought and only involve publicly traded companies, the companies are still in line to be listed in Switzerland. The Connect program, a cross-border investment facility, will include Switzerland and Germany.
Sunwoda, the world’s largest consumer battery manufacturer by installed capacity, listed in Shenzhen, has raised $ 440 million in share issues on the Swiss SIX exchange and share trading will begin Monday at 1400 GMT.
A total of eight listed Chinese companies, including Lepu Medical Tech and battery maker Gotion High-Tech, have raised more than $ 2.5 billion through the issuance of global certificates of deposit (GDR) on the Swiss stock exchange. More than a dozen Chinese companies have announced plans to follow suit, according to documents filed with the exchange.
The China-Switzerland Connect enables Chinese companies to raise capital by placing and listing GDRs on the SIX Swiss Exchange. Swiss companies can list Chinese certificates of deposit on Chinese exchanges.
GDR issuance in Europe provides an “additional channel” for Chinese companies to access international capital, said Mandy Zhu, head of global banking for China at UBS. It comes at a time when prices in the United States and Hong Kong have slowed.
Chinese quotations in the United States stalled last July following a broad regulatory crackdown: only $ 152.5 million worth of Chinese quotations have been made so far in the United States in 2022, up from $ 12.8 billion in 2021. according to Refinitiv.
According to Deloitte, the initial public offering (IPO) market, a favorite place for fundraising by Chinese companies, fell by 81% in volume in the January-September period, due to tensions between Beijing and Washington and the volatility of the market.
UBS’s Zhu said the Swiss bank is working with a number of Chinese companies with major GDR issuance plans, without disclosing any names or transaction targets. He added that UBS is also discussing with Chinese companies the possibility of a listing in Frankfurt once the rules are in place, so “our GDR mandates will keep coming”.
Zhu said Sunwoda’s “historic” Swiss deal shows that Chinese companies with solid fundamentals can still whet the appetite even in an unfavorable market environment, as long as underwriters can help identify the right investors. UBS was the global coordinator and bookrunner of the transaction, along with Goldman Sachs.
According to UBS, Sunwoda’s GDR issuance generated strong demand from international investors during the order book building process.
This allowed Sunwoda to exercise an option to expand its fundraising by nearly 50% from an initial $ 300 million issue, almost hitting the upper limit approved by regulators, Zhu said.
Despite the better prospects, the size of the deals was relatively small, with Gotion’s Swiss listing at $ 685 million being the largest to date with the Swiss Connect system.
Drew Bernstein, co-chair of Marcum Bernstein & Pinchuk, a China-focused accounting firm, said the US market will remain the best option for Chinese companies once regulatory hurdles and long-standing market dispute are eliminated. – US corporate audits have been resolved.
“Nowadays, obviously, companies have a lot of choice and the markets themselves have different things to offer,” he said. But for many exchanges, “they don’t really have scale. They don’t have liquidity.”