The US market used to be the top choice for Chinese internet companies raising funds, but recent regulatory changes and rising investor enthusiasm for the sector in China are encouraging these firms to pack up and return home. Higher multiples and abundant liquidity in surging Chinese markets are giving shareholders of those American depositary receipts a reason to shift listing from Wall Street to Shanghai or Shenzhen. More importantly, Beijing has voiced support for overseas companies to be dually listed without having to tear down their structures. This is encouraging more Chinese firms to move back as relisting is becoming a lot easier. “After Premier Li Keqiang invented the concept of ‘Internet Plus’, which means to integrate internet with traditional industries, market sentiment on the internet sector has been high,” said Credit Suisse analysts led by Dick Wei. “Listing [in China] has become attractive for many China internet ADRs for higher valuation as well as liquidity.” Overseas-listed Chinese internet stocks are generally trading at a much lower price-earnings multiple than their counterparts in China. For example, the online games sector is trading at 19 times PE overseas but 108 times in the Chinese market. An e-commerce goods provider has a PE ratio of 55 overseas, while the sector is enjoying a ratio of 320 in the home market, according to the Credit Suisse report. Going home is not all good though from Credit Suisse’s perspective. A rapid increase in share prices may not be an incentive to encourage internet firms to deliver earnings into real performance. “If the management is rewarded with share price gain simply by telling a story but not by strong execution, [it] would not be incentivised to build long-term success,” it said. “Besides, a long lock-up period for investors and management, inflexibility of secondary offerings and use of proceeds are other concerns.” Until recently, the only way for a US-listed Chinese firm to relist in China is to privatise, tear down the variable interest entity structure, merge all operating units into a new company and apply to launch an initial public offering. In most cases, it would be a wait of at least three years before the share offering is finally held. Who knows where the market would be by then? So far this year, seven overseas-listed Chinese firms, including Sungy Mobile and WX Pharma, have gone private and are expecting to relist in the Chinese market. The State Council and regulatory bodies have publicly voiced strong support for VIE-structured enterprises to list domestically through some “express ways”. For example, Shenzhen Qianhai has announced its interest in building an “offshore exchange”, which would allow overseas companies to list or dual-list. “It is possible that within a few years, most Chinese internet ADRs will be allowed to be dually listed in the A-share and overseas markets,” Credit Suisse said.