China Taibao announced on September 23 that its board of directors agreed to issue Global Depository Receipts (GDR) and list on the Luen Stock Exchange. GDR represents no more than 628.67 million new A-share shares in basic securities, not more than 10% of the companys A-share shares before the issuance.
This is the first insurance institution in China to announce that GDR is to be issued. After the GDR issuance, China Pacific will become the first A + H + G listed insurance company (Shanghai, Hong Kong, London).
To issue GDR and land on the Lun Stock Exchange
At the 20th meeting of the 8th board of directors, held on September 23, China Pacific Insurance Group Co., Ltd. considered and adopted the Bill on the Listing Scheme of China Pacific Insurance (Group) Co., Ltd. for issuing GDR on the London Stock Exchange. The meeting agreed that the company would issue global depository receipts and apply for listing on the London Stock Exchange. GDR uses newly issued A-share shares of the company as its basic securities. The face value of each GDR will be determined by the conversion rate between the issued GDR and the A-share shares of the underlying securities.
Global Depository Receipts (GDR), also known as Global Depository Receipts, refers to stocks or bonds that are publicly issued globally and can be traded in two or more financial markets. Compared with issuing and listing stocks abroad, it can overcome many inconveniences of foreign investors in stock trading, dividend distribution, allotment and exercise of other shareholdersrights.
The newly issued GDR represents no more than 628.67 million shares of A-shares in basic securities, not more than 10% of China Pacific A-shares before the issuance.
From the point of view of the issuing object, the GDR is going to be sold worldwide, and is intended to be issued to qualified international investors and other investors who meet the relevant regulations. The issuance price is determined according to international practice and Huluntong regulation, through order demand and bookkeeping, and according to the domestic and foreign capital market conditions at the time of issuance. The specific issuance time will be determined according to the domestic and foreign capital market conditions and the progress of the examination and approval by domestic and foreign regulatory authorities.
The GDR issued in this issue can be converted to the A-share of China Pacific Securities, which meets the regulatory requirements both at home and abroad. According to the requirements of Huluntong Regulations (Trial Implementation), the GDR issued in this issue shall not be converted into domestic A-share stocks within 120 days from the date of listing.
Why does Taibao issue GDR?
As an important financial enterprise in Shanghai, China Taibao, Pudong Development Bank and Guotai Junan are three major financial control platforms in the state-owned financial system of Shanghai. In recent years, Chinas Taibao has been a value growth route, and there is no shortage of money on the books.
According to the latest semi-annual report of China Pacific Insurance Company in 2019, the company realized business income of 220.386 billion yuan in the first half of the year, of which insurance business income was 207.809 billion yuan, an increase of 7.9% over the same period of last year, and net profit of attributable mother was 16.183 billion yuan, an increase of 96.1% over the same period of last year. By the end of June, the comprehensive solvency adequacy rate of Taibao Group was 296%, and the core solvency adequacy rate was 290%, which were far higher than the regulatory requirements.
So why does China Pacific plan to issue GDR and land on the Lun Stock Exchange? It is understood that the proposed fund raised by Taibao in this issue of GDR will be used to steadily promote the companys international layout and replenish capital after deducting the issuance cost.
Taibao said in the announcement that the company is committed to becoming a first-class international competitive insurance and financial service institutions, seeking external growth opportunities, promoting internal growth momentum conversion, and comprehensively improving the companys operating level.
Overall, there are three major benefits of this GDR and listing:
Second, it will help the company to steadily promote its international layout and further enhance its global influence.
Thirdly, it will help the company to consolidate its capital base, enhance its steady operation ability and risk management level, and support the full implementation of the companys transformation strategy of 2.0.
The Second List after the Opening of Huluntong
China Taibaos planned landing on the Lun Stock Exchange is also a product of the accelerated opening up of Chinas capital market. Since last year, the Securities Regulatory Commission and the Shanghai Stock Exchange have explicitly supported blue-chip enterprises in China to issue global depository receipts through the Huluntong business channels, making full use of the status of the International Financial Center of the Luen Stock Exchange.
The so-called Huluntong refers to the interconnection between the Shanghai Stock Exchange and the London Stock Exchange. Two eligible listed companies can issue Depositary Receipt (DR) and list on the other side of the market. Unlike Shanghai and Hong Kong Stock Exchange, which allows investors to buy shares in both markets, Huluntong allows overseas buyers to indirectly hold shares in the other market through DR tools.
After Huatai Securities issued its first GDR product in June this year, it was only three months before Taibao planned to land on the Lun Stock Exchange again.
Huluntong includes two parts: east-oriented business and west-oriented business. Huatai Securities and China Pacific are both west-oriented businesses. In fact, it is not easy for enterprises to issue GDR smoothly. According to the rules, the issuer of the East-to-East China Deposit Certificate shall be a company listed on the main board of the London Stock Exchange and listed in the senior part of the official list of the British Financial Conduct Regulatory Authority. The West-to-World Deposit Certificate issuer shall be a listed company of A-share on the main board of the Shanghai Stock Exchange and the global Deposit Certificate issued by the issuer shall be admitted to the List of listed companies.
The following conditions must be met for the issuance and listing of GDR, including but not limited to: 1. The issuance and listing of GDR on the basis of the general authorization proposal has been approved by the Provisional ShareholdersMeeting and authorized by the Board of Directors; 2. The China Banking and Insurance Regulatory Commission and the China Securities Regulatory Commission have approved the proposal to issue GDR and list on the market; 3. The GDR has been accepted. Enter the UKFCA Recognition List and approve trading in the Huluntong Sector, the main market of the London Stock Exchange.
Huatai Securities and China Pacific have landed on the Lun Stock Exchange one after another, which has a very positive significance in promoting the integration of domestic institutions into the global core capital market and promoting the cooperation between Shanghai and London, two major financial centres.
According to an investment bankers analysis, there are many advantages of listing companies on the Luen Stock Exchange, including raising funds and enhancing the visibility of enterprises. At present, Chinas insurance industry has developed rapidly, and has become the first and second largest insurance market in Asia and the world. As a domestic head insurance company, China Pacific Insurance has certain advantages in attracting international investors.