By Tang Guhan
China's two tech giants Baidu Inc. and NetEase Inc., who are listed in Nasdaq in the US, have chosen their sponsors for their Chinese Depository Receipts (CDRs), before coming back to the domestic A-shares market, as reported by Caixin.com yesterday.
Baidu and NetEase are proactively preparing for their listing in the A-shares market through CDRs on the heels of Alibaba and JD.com's return to the A-share market. "We hope to return to the A-share market as soon as possible," said Robin Li, the chairman of Baidu.
Baidu chose Huatai Securities as a sponsor for its CDRs while NetEase finalized CITIC Securities and Huatai Securities as its sponsors.
The CDRs are one of the securities that allow overseas listed firms to issue depositories representing their stocks in China's stock market. It makes it more convenient for investors to buy shares of overseas listed companies.
Meanwhile, CDRs have become the most convenient and quickest way for overseas listed companies like Alibaba, Tencent, and Baidu among others, to come back to the domestic market.
Compared to ordinary shares, CDRs are much more complicated with their transaction processes, legal relationships, therefore, they are riskier and need stricter rules to protect investors' interests, according to experts in the area.
Moreover, the threshold is rather high for the CDRs regarding companies' net profits, net asset values, and market shares among others. Only around 10 companies have met the conditions as of now, such as Alibaba, Baidu, JD.com, and Tencent among others.
Analysts predicted that the first batch of companies would absorb funds worth at least RMB 300 billion, accounting for less than 1 percent of the aggregated A-shares market value.
Securities firms will benefit from the CDRs. Big securities firms will gain around a 20 percent growth in underwriting fees, as estimated by Ping An Securities.
