As domestic CDR is gradually implemented, I believe that more listed companies will return to A-shares from the US stock market, which can bring more high-quality listed companies to A-shares.
CDR is conducive to the A-share market and value improvement - a small discussion on DR (depositary receipts)
text/Chen Sijin
On May 4, a spokesperson for the China Securities Regulatory Commission said: The "Regulations on the Issuance and Trading of Depositary Receipts" will be officially solicited public opinions from the public. Moreover, the CSRC has clarified the legal application and basic regulatory principles of depositary receipts, as well as other relevant provisions of the CSRC.
So, what is a depositary receipt?
Depositary Receipts (DR) refers to a transferable certificate of securities circulating in a country's securities market and representing foreign companies (generally representing company stocks, but sometimes also representing bonds). It is traded on local stock exchanges and is a financial derivative instrument in the scope of company financing business, which is conducive to purchasing foreign companies' stocks.
For example, American Depository Receipts (ADR) are actually composed of common shares of foreign companies. Customers holding tradable ADRs can voluntarily choose financial instruments to convert ADRs into common shares.
Generally speaking, depositary receipts require companies to comply with specific rules of the stock exchange before their shares are listed for sale. For example, a company must transfer its shares to a brokerage firm in its country. After receiving the stock, the brokerage company immediately contacts the International Stock Exchange as the custodian to sell the custodian depositary receipts. This practice ensures that the stock is real and makes it impossible to hide tricks between foreign companies and international brokerage firms.
Typical ADRs will go through the following steps before issuing:
First, the issuing bank in the United States must study the financial status of foreign companies in detail to evaluate the strength of their stocks; then purchase the stocks of foreign companies and divide the stocks into data packets, each data packet is issued as ADRs and issuanced through US Stock Exchange ;
Secondly, American depositary receipts are priced in US dollars, and dividends are also paid in US dollars, which makes it easy for American investors to purchase foreign companies headquartered in the United States, which is convenient and economical, and also avoids the foreign-related tax obligations required for each transaction.
Although the price tendency of ADR is consistent with the price of foreign securities shares, it is also possible to deviate from the stock price, thus providing investors with opportunities for arbitrage. Back then, when I was working at Credit Suisse's US investment bank CSFB, Credit Suisse was ADR (Credit Suisse Group AG ADR) in the United States. I always paid attention to the stock price of my company and found many opportunities for arbitrage, but because I was insider, I was supervised by the company and it was difficult to operate.
, for example. Since the number of common shares that make up each ADR is different, the share ratio of ADR is indicated by the ADR ratio. For example, the Dutch Royal Shell ADR "RDSA" ratio is 2:1, i.e. each ADR contains two common shares. If the stock trades at $35 per share, the ADR price may be around $70. If the price exceeds US$70, speculators will buy at a low price in one market and sell at a high price in another market. Even if they make $0.1 per share, increase the trading volume and make continuous profits after multiple transactions, they will eventually converge.
Judging from the experience of ADR in the United States, for high-quality companies, they have strengthened liquidity and found more reasonable value, and the effect is very good.
Recently, the list of the first eight "unicorn" companies in China to return to the A-share market has been confirmed, including Tencent, Alibaba, Baidu, , JD.com, , as well as Ctrip, Weibo, , Netease and Sunny Optics. China's "unicorn" in the US stock market is often undervalued for various reasons.
If China's CDR begins to be implemented, I believe that in the future, more Chinese "unicorn" companies will return to China's A-shares from the US stock market. Possible benefits include bringing more high-quality listed companies to China, giving investors more choices. In addition, it will force those poorly performed stocks in A-shares to improve themselves and achieve overall prosperity in the A-share market.
However, compared with the situation in the United States, China's "unicorn" companies continue to decline due to lack of fundamental support after their stock prices are super high. Because once it is given the concept of "unicorn", the stock price will rise continuously. We should be vigilant and beware of the emergence of bubbles and excessive speculation.
In short, for the overall Chinese capital market, the launch of ADR will outweigh the disadvantages. The Chinese stock market may be more market-oriented, transparent and standardized. While capital truly serves the real economy, Chinese investors can share the dividends brought by the healthy development of the real economy.
written on May 6, 2018 in Toronto
extended reading: "Unicorn Fund is empty, gold mine or landmines? 》: https://www.toutiao.com/a1602975413389315/
Unicorn Fund is empty, gold mine or landmines?
De Xiaocai Delinshe
In the past two days, Brother Cai’s eyes and ears have been washed several times by the “return of unicorns”, “CDR funds” and “strategic allotment”. Unicorn Fund is popular!
After 3:00 pm on June 8, including the weekend, the "highly anticipated" strategic allocation fund , including 6 fund companies including Southern, E Fund, Huaxia , Jiashishi, China Merchants, and Huitianfu, can already make an appointment to subscribe on the fund company website or APP, many third-party channels.
This time, the fund companies, banks, securities companies and third parties are very enthusiastic, and investors are also very enthusiastic. "Some people in the fund industry said that even the customer service Q&A in the past two days has reached the historical extreme level, and many investors have asked, "Can you subscribe in advance and will you not be able to get it." Even the aunties in the vegetable market have received unicorn fund advertisements, which shows the grand occasion this time. What is a strategic allocation fund in
? Is it worth investor to grab it?
I think that due to the Chinese listing system, a large number of high-quality Internet companies and technology companies went overseas to list, such as BATJ: Alibaba (A) listed on the New York Stock Exchange , Baidu (B) and JD.com ( J) Listed on the Nasdaq in the United States, and Tencent (T) listed on the Hong Kong Stock Exchange of Hong Kong in China. In order to support the new economy, break down institutional barriers, keep good companies in China, and let good companies go public as soon as possible, the CDR model becomes a better choice.
For example, if Alibaba, listed in the United States, returns to A-share listing through the CDR model, it means that 1 billion US stocks Alibaba is placed in the ICBC North American branch, and then ICBC can issue the corresponding 1 billion depositary receipts. These depositary receipts can be taken out by ICBC China Branch in the mainland and traded in RMB after listing. Buying depositary receipts means that if you own stocks listed in the United States, you can enjoy dividends, but you do not have voting rights. CDR is a depositary receipt.
strategic allocation fund mainly adopts two investment strategies: strategic allocation and fixed income. This means that these funds mainly invest in CDRs through strategic allocation, while other positions invest in fixed income varieties.
investors subscribe to strategic allocation funds on the one hand because national policies support the return of unicorns. On the other hand, they want to seize the opportunity of CDR return of top companies such as Baidu, Alibaba, JD.com, and Tencent to share the dividends of corporate growth.
But national support does not mean the country To ensure profit, the benefits of strategic allocation funds have been promoted by funds, securities companies, banks and other sales channels. Here, Cai Ge talks about the risks of strategic allocation funds.
First of all, buying stocks is buying companies, and buying strategic allocation funds is buying unicorn company . For some unicorn companies, it has passed the growth period and has developed and matured. Once the growth rate of future performance of these mature unicorns decline, it will inevitably affect these "unicorn" funds.
Secondly, some of these unicorns are US stocks. The current situation of US stocks is that the nine-year bull market has passed and has entered a bear market. Trump insists on the United States first, constantly raising taxes on trading partners in foreign trade, the trade war spreads everywhere, and the Federal Reserve is still raising interest rates. Under this economic situation, the outlook for US stocks is not optimistic, and the stock performance of unicorn companies will also be affected.
again, closed for three years. Although is opened once every six months, it is only open for subscription. Investors either wait three years to redeem or transfer to the market for trading. If the price drops, there is a possibility of losing money in the market for trading.
Finally, for "unicorn" companies, there are higher expectations and valuations in the market. If companies are overvalued, they will naturally bear the corresponding market premium risk.
Cai Ge warmly reminds that funds are risky and you should be cautious when entering the market. Finally, I have to give the regulatory authorities a thumbs up, media news, and regulatory authorities require compliance publicity...
