New economy firms likely to issue $72b in CDRs

SHANGHAI - China's new economy companies are expected to raise 450 billion yuan ($71.7 billion) on the country's bourses in three years by issuing China Depositary Receipts (CDRs), according to GF Securities.

They are likely to raise 250 billion yuan in the first year and 100 billion yuan in each of the following two years, GF Securities said in a research note Tuesday.

China plans to woo overseas listed Chinese firms, especially major tech companies, back to the domestic A-share market with the introduction of the CDR system, according to Yan Qingmin, vice-chairman of the China Securities Regulatory Commission.

CDRs, a financial derivative, resemble ADRs (American Depository Receipts), which facilitate fundraising for non-US companies in the US capital market.

Tencent, Alibaba, Baidu, JD.com, Netease, Weibo, Ctrip and Sunny Optical are the first eight potential pilot companies, said the note.

Tencent and Alibaba may launch a total of 60 billion yuan in CDRs and the other six listed companies could issue 90 billion yuan in CDRs in the A-share market, according to Dai Kang, chief analyst with GF Securities.

The CDRs traded by domestic investors could have "markedly higher valuations," said Dai.