The US-China technology war aside, SMIC has a practical reason for delisting from New York: its ADRs are hardly traded
- The number of ADRs traded everyday on average were 10 per cent of the transactions in Hong Kong, even in the first eight months of SMIC’s simultaneous listings in New York and Hong Kong in 2004
- In the last five years, the gap had widened to three ADRs in New York for every 1,000 SMIC shares in Hong Kong
Semiconductor Manufacturing International Corporation (SMIC), China’s largest chip maker, has a practical reason for its plan to delist from the New York Stock Exchange: Its American Depositary Receipts (ADRs) are nary traded.
The average daily transaction of the Shanghai-based chipmaker’s ADRs in a year never surpassed 10 per cent of the number of SMIC’s shares that change hands in Hong Kong since the two financial instruments listed on the same day in 2004. In the last five years, the ratio widened to three ADRs for every 1,000 SMIC shares that changed hands in Hong Kong, according to South China Morning Post’s calculation using Bloomberg’s analytics.
The delisting plan also came hot on the heels of a back-to-back announcement by Shanghai’s municipal government and the Chinese finance ministry to offer tax breaks, financial incentives and funding to nurture China’s home-grown chip producers to ensure the industry’s self-sufficiency.
“The delisting comes at a sensitive time and will lead to a lot of speculations,” said Ken Chen Hao, a strategist at KGI Securities in Shanghai. “In the home market, SMIC is actually a company with lot’s of exposures to analysts’ coverage, and many analysts recommend this company on road shows.”
SMIC’s Hong Kong listed shares are valued at HK$46.8 billion (US$5.96 billion), compared with its ADRs, capitalised at US$5.29 billion. A call made to Terry Ding, a media relationship official at SMIC, went unanswered.
Interactive infographics: ‘Made in China 2025’ - how Beijing is boosting its semiconductor industry To be sure, SMIC highlighted the lack of liquidity in US trading as one of the key reasons for its voluntary delisting. High costs of maintaining the listing status and the ADR registration were cited as other factors. SMIC will officially file for the delisting next week and the delisting is expected to be completed 10 days afterwards, the statement said.
An average of 159,055 ADRs changed hands on a daily basis through Friday this year, compared with 28.1 million shares on average that were bought and sold on the Hong Kong exchange in the same period, the data showed.
SMIC’s Hong Kong shares jumped by as much as 10.4 per cent to an intraday high of HK$9.30 (US$1.18) on Monday, recovering from Friday’s 4.3 per cent loss. The company’s ADRs fell by as much as 7.1 per cent to US$5.11 on Friday, with US markets being closed on Monday for the Memorial Day holiday.
