Chinese companies tap into European investors, who in can diversify their portfolios with Chinese investments. On paper, the China-Switzerland Stock Connect Program, which was set up in July 2022 to facilitate GDR listings on SIX, is a win-win. “If investors were more familiar with Chinese companies and had more information, trading in these securities would certainly pick up.” Win-win? “European investors know little about these players, their activity, their market shares, their rate of growth, their projects,” he told the AWP news agency. ![]() Gong Weiyun, managing director of the China Construction Bank in Zurich is adamant that political tensions between China and the West have played no part in the poor trading performance of GDRs. Schneiter sees a bright spot with the lifting of Covid-19 lockdowns in China at the end of last year, meaning Chinese firms can now send teams to Switzerland to promote their companies and the GDR investment opportunities. SIX Group, which runs Switzerland’s largest stock exchange, hopes volumes will build momentum once traders get used to the financial instrument. “Whether or not there will be more secondary market liquidity for GDRs in the near future remains to be seen,” Christian Schneiter, of the Vischer law firm in Zurich, told SWI swissinfo.ch. Investors are cashing in on a quirk in the system that allows them to issue GDRs at a discount to normal shares and then pocket the difference when they convert them into company stock. But the novelty has yet to catch on, resulting in pitiful trading volumes (liquidity) and a dearth of revenues for the exchange.ĭepending on the company, investors have hauled between 40% and 70% of their GDRs off the Swiss stock exchange after the lock-in period and converted them into normal shares listed in China. ![]() The idea is that investors then sell their GDRs to others, thus creating a secondary trading market for the financial instrument. To get around differences in the financial regulations of each country, SIX allows Chinese firms to list GDRs - which are certificates that represent shares of a company that can be converted into its stock following a 120-day lock-in period. ![]() + Why more Chinese firms will come to Switzerland In 2019, the exchange was banned from trading European Union company shares following a diplomatic impasse between Switzerland and the EU. But despite 14 Chinese companies raising some CHF4.4 billion ($4.9 billion) by listing Global Depositary Receipts (GDRs) on the Swiss exchange in the last 12 months, the scheme has yet to prove a money spinner for Switzerland.įor SIX Group, which runs Switzerland’s largest stock exchange, the arrival of Chinese companies could provide a welcome boost to trading revenues.
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