Shanghai firms eye ADR issues
THREE Shanghai-listed companies plan to issue American depository receipts (ADRs) to stimulate trade in their B shares and widen their options for fund-raising.
Shanghai Erfangji Co, Shanghai Tyre and Rubber Co and Shanghai Chlor-Alkali Chemical Co are expected to be the first to issue ADRs on B shares.
They have submitted proposals for the issue to Shanghai's Securities Regulatory Committee, according to the China Daily Business Weekly.
Mainland securities officials have long been interested in ADRs, but no company has yet received permission to issue them.
An official at Shanghai Chlor-Alkali said yesterday that the company's senior officials would fly to the US on Sunday to discuss an ADR issue with Bank of New York officials.
It is understood that Bank of New York is also advising Shanghai Erfangji, while Citibank is the custodian bank for Shanghai Tyre and Rubber.
The companies are hoping that trade in the ADRs could begin this year.
Successful ADR launches by the three companies are likely to encourage other Shanghai B-share companies, most of whom are in favour of them, to follow suit.
The ADRs would be issued through the level-one programme and traded through local brokers, which Smith New Court Far East's Dong Ming said was simpler than listing them on the New York Stock Exchange.
Mr Dong said such a procedure would allow American investors to buy the stock more easily.
''The ADR issue will enhance the profile of the company with a wide range of US investors and a broader shareholder base should help boost and stabilise the share price,'' he said.
''Liquidity in the B-share market can only improve with US investors becoming more active via the ADRs.'' ''The three companies, all of which are of a considerable size, will increase US investors' awareness of China's stock markets.''