Regulatory logjam in China offshore listings hits firms' funding plans

Celestial Asia Securities Holdings

29/06/2023 24:00

* 
      China introduced new rules for offshore listings on March
31
    

        * 
      No Chinese firm has listed in US or Hong Kong under the
new
rules
    

        * 
      Only firms from selective sectors are able to get CSRC
approval
- lawyer
    

        * 
      Several authorities are involved in the process, causing
delays
- banker
    

  
    By Scott Murdoch and Kane Wu
       SYDNEY/HONG KONG, June 29 (Reuters) - Chinese companies
are finding it challenging to get timely regulatory approvals
for overseas share offerings as scrutiny of their proposals has
intensified under new listing rules, frustrating potential
issuers and investment bankers.
    Since the launch of the overhauled listing regime on March
31, not a single Chinese firm has gone through the process and
successfully listed in their favoured destinations of Hong Kong
or the U.S., publicly available data showed. 
    The trend underscores mounting challenges for Chinese firms
looking to raise capital offshore even as an unprecedented
regulatory crackdown on private enterprises over the last three
years has ebbed and Beijing is looking to shore up its economy. 
    China's long-awaited rules for offshore stock exchange
listings form part of a regulatory tightening on cross-border
listings after years of a laissez-faire approach.
    The Chinese securities regulator has accepted offshore
listing filings from 14 companies as of June 15, and is awaiting
additional documents from 38 other firms for their filings to be
accepted, public disclosures showed.
    Out of the 52 planned listings, as many as 43 are for Hong
Kong and nine are for the U.S.
    Only two firms - self-driving technology firm iMotion
Automotive Technology (Suzhou) and food company Shiyue Daotian
Group, have successfully completed their listing filings with
the securities regulator to float shares in Hong Kong, showed
the disclosures.
    The two are, however, yet to go public.
    Under the new regime, the waiting time for approval from the
China Securities Regulatory Commission (CSRC) for offshore
listings has increased to at least six months from the earlier
2-3 months, said a Hong Kong-based capital markets lawyer.
    Only companies from selective industries are able to win the
CSRC's approval to list offshore, said the lawyer, declining to
be named as he was not authorised to speak to the media.
    The CSRC did not respond to a request for comment.
    Among those awaiting CSRC's green light are JD.com's  JD.O 
property and industrial units, which the online retailer planned
to float in Hong Kong as soon as possible in what could be a $1
billion deal each, people with knowledge of the two IPOs said.
    JD.com was hoping to list at least one of the units by
mid-year, said one of the people. The earliest the IPOs can
happen now is the third quarter, given the pending approvals,
the sources said. 
    CSRC disclosures showed the listing filings of the two units
are pending "additional materials".
    JD.com did not respond to a request for comment.
    
    REGULATORY 'BLACKBOX'
    The new listing regime requires CSRC to respond within 20
working days upon accepting an issuer's listing filing. If the
regulator deems the filing incomplete, it can ask an issuer to
submit additional documents within five days of receiving the
filing, and an issuer will need to respond within 30 days.
    Submitting additional materials can be time-consuming and
thus delay the listing process, said bankers and lawyers.
    A banker said the approval process has become a "blackbox",
as the CSRC also needs comments from other industry supervisory
bodies before making a decision, and in most cases it's not
clear which part of the process the application gets stuck in.
    On Tuesday, Asia's largest financial lobby group told
Reuters the new rules have left bankers and lawyers who work on
listings unsure how to take on liabilities and avoid breaching
tightened confidentiality rules.   

 (Reporting by Scott Murdoch in Sydney and Kane Wu in Hong Kong;
Additional reporting by Selena Li in Hong Kong; Editing by
Sumeet Chatterjee and Muralikumar Anantharaman)
 ((kane.wu@thomsonreuters.com; +85228436590; Reuters Messaging:
kane.wu.thomsonreuters.com@reuters.net))