Mainland firms enjoy credibility in ADRs despite local easing
2001-07-12
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Chinese companies will continue to seek Wall Street listings even as the domestic market becomes easier to tap, according to bankers.
Bank of New York officials, on a regional tour yesterday, said Chinese and other Asian companies would seek the "credibility" offered in an American depository receipt (ADR).
"There's no question that there's a huge untapped vein of capital on the mainland," managing director Timothy Keaney said.
"You also find if you ask a lot of these companies (why) they have ADRs, they will tell you they like the exposure in the (United States), the element of credibility," Mr Keaney said.
Part of the credibility comes from having to meet the stringent accounting requirements of the US Securities and Exchange Commission. Companies with listed ADRs, for instance, must provide quarterly earnings reports whereas most Asian markets only demand half-yearly updates.
Partly because of the regulatory burden, most companies with ADRs go with the lower profile over-the-counter ADR programme for which Asian companies need only duplicate the reports provided to their home market shareholders.
While dozens of Hong Kong companies have ADRs, only a small handful of them are listed. One of the latter is Pacific Century CyberWorks, which reported an attributable loss of HK$ 14.57 billion for last year in a filing to the US Securities and Exchange Commission.
The figure, calculated under US rules, is more than double the $ 6.9 billion the company reported in March based on Hong Kong accounting standards.
China companies are a bit more brave in this category, with most of the main Hong Kong listed red chips also having listed ADRS in the US. The list includes China Mobile, China Unicom, PetroChina and CNOOC.
Issuance of ADRs has fallen in the first half of this year, but trading in ADRs is up by volume.
"I think it's largely driven off of the fact that ADRs are becoming much more accepted in the US," Mr Keaney said.
ADRs can help Asian companies gain exposure to funds managed in the US which cannot buy shares denominated in foreign currencies.
Bank of New York has more than 65 per cent of the ADR market. |
