China’s CDR share plan to lure big tech firms back home may prove a hard sell to retail investors
A survey shows more than half of retail investors are not interested in putting money into funds that will back the Chinese depositary receipt scheme
Six newly approved Chinese mutual funds, designed to support a government initiative to lure back the country’s best tech companies through complementary share listings in China, could find it difficult to attract individual investors because of uncertainties over how the scheme will work.
The funds are designed to invest in Chinese depository receipts (CDRs) under a plan backed by Beijing to let the country’s retail investors buy into successful firms that are listed overseas. But a survey released on Monday showed that more than half of such investors would not be interested in the funds, as they worried about losing money.
“The key concern is probably the lock-up period,” said Kevin Leung, executive director of investment strategy at Haitong International Securities, referring to the funds’ requirement that investors must keep their money invested for three years.
He noted that some people may consider the share prices of the big Chinese tech firms listed overseas to be too expensive and they may have missed the period of rapid growth in these companies. With the lock-up period they would not be able to freely exit their investment if it was not achieving the returns they wanted.
The survey of 7,500 retail investors by Sina Finance found that only 44.8 per cent said they would be interested in investing.
The six listed open-ended funds would be allowed to become strategic investors in CDR issues by hi-tech firms, according to the official website of the regulator, the Chinese Securities Regulatory Commission (CSRC).