China’s Haier mulls D-share issue to raise funds in Germany

Haier’s listing on the CEINEX, if went ahead, represents another significant step in China’s globalisation drive. Offshore yuan-denominated products will also be traded on the CEINEX

PUBLISHED : Saturday, 10 February, 2018, 7:02am
UPDATED : Saturday, 10 February, 2018, 7:01am

China’s efforts to connect with German stock market look set to come to fruition after white goods maker Qingdao Haier confirmed that it is studying the feasibility of issuing the so-called D shares in Frankfurt, following more than two years of preparations by regulators.

A listing by a top Chinese firm on the China European International Exchange, known as CEINEX, will represent another significant step taken by Beijing to reinforce its country’s globalisation drive.

D shares refer to the stocks in mainland companies to be traded on the CEINEX, a joint venture trading platform established by the Shanghai Stock Exchange, China Financial Futures Exchange and Deutsche Boerse in November 2015, on which stocks, bonds and exchange-traded funds will be listed.

The D shares are part of the Chinese regulators’ plan to internationalise the capital market as the world’s second-largest economy aims to increase its economic and financial influence worldwide.

Haier said in a statement on Friday it had not decided on whether to float D shares, but it is studying the issue.

Reuters reported that the Qingdao-based company which acquired General Electric’s appliance business in 2016 for US$5.4 billion would spearhead the move among Chinese firms to list on the CEINEX.

Shanghai Stock Exchange spreads its net further through joint trading of ‘D-shares’ with Frankfurt

“Gaining an access to an overseas stock market is of great significance to companies like Haier,” said Haitong Securities analyst Zhang Qi. “Due to its businesses around the globe, an overseas listing will benefit it in raising capital, honing its image and expanding sales.”

Shanghai-listed Haier reported sales of 50.7 billion yuan (US$8.05 billion) outside the mainland in the first three quarters of 2017, up 43 per cent from a year earlier. Consultancy Euromonitor said it had a 10.3 per cent share of the global market for white goods in 2016.

Haier has been known as one of China’s go-global pioneer firms over the past three decades, securing market shares in developed economies such as the United States.

Shanxi Securities said in a report that Haier’s development of smart technologies to help its appliances better serve customers amid the digitalisation era had proved to be successful, with its premium brand Casarte posting a 41 per cent jump in sales in the first three quarters of 2017.

Due to its businesses around the globe, an overseas listing will benefit it in raising capital, honing its image and expanding sales
Zhang Qi, Haitong Securities

The CEINEX will welcome “China national champions” to list on it, according to Reuters, citing a circular it distributed to potential investors.

“Haier certainly meets the criteria, and the regulators also need to open the D-share market for Chinese investors,” said Ivan Li, an asset manager with hedge fund group Loyal Wealth Management. “Frankfurt is a major financial market in Europe, and it is advisable for the regulators to open the global equity market to mainland investors sooner rather than later.”

In late 2014, a cross-border stock trading scheme linking the Hong Kong and Shanghai stock exchanges was launched, followed by a similar programme between Hong Kong and Shenzhen in December 2016.

Beijing is also on its way to creating a Shanghai-London stock connection scheme after the two exchanges completed their feasibility studies at the end of last year. The Shanghai bourse said a report had been submitted to authorities in China and Britain for review.

Shanghai and London stock exchanges take a step closer to setting up trading link

Under the trading link, investors in China and Britain can trade shares on each other’s markets.

The D-share market is also seen as a platform to support the Chinese yuan’s internationalisation. Offshore yuan-denominated products will be traded on the CEINEX.

It is also designed to ease Chinese companies’ thirst for capital as they are given an additional funding access.