Baidu Expected to Return to A-share Market in June Via Chinese Depository Receipts

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Domestic media reports that internet giant Baidu is set to become the first overseas-listed Chinese company to return to the A-share market via the issuance of Chinese depository receipts (CDR) in June.

On 3 March Baidu chairman and CEO Robin Li said in an interview that “any time that policies allow Baidu to return, we definitely hope to return to the domestic share market as early as possible.”

Baidu operates China’s leading search engine with over 2 billion active users globally, and is currently listed on the NASDAQ stock exchange.

According to a report from Lanjing TMT there are at least two other Chinese internet giants that plan to use CDR’s to return to A-shares via CDR’s, including Alibaba and JD.com.

CDR’s are a new class of security that will enable domestic Chinese investors to acquire equity stakes in overseas stocks, as well as allow the China Securities Regulatory Commission to apply a distinct set of regulations to foreign companies instead of making adjustments to rules for existing companies.

Beijing hopes that depository receipts will foster the return of some of China’s leading tech giants, who first listed abroad in order to gain access to the more favourable financing conditions of mature markets, and have since transformed into some of the world’s biggest companies.

State planners expects the return of leading tech giants to serve China’s strategic interests by spurring the maturation of the equity market and putting domestic industry in a better position to compete for technology against the US.

A report from Citic Securities said that Alibaba, Baidu, China Mobile, China Telecom JD.com and Netease are amongst the leading candidates for Chinese depository receipts.

Observers expects applications to open for Chinese Depository Receipts (CDR’s) in early June, following the release of the draft version of the “CDR Issuance and Transaction Administrative Measures” (存托凭证发行与交易管理办法) on 5 May.

The State Council previously approved and issued the China Securities Regulatory Commission’s “Several Opinions on Undertaking Trials for Innovative Enterprises Issuing Shares or Depository Receipts Domestically” (关于开展创新企业境内发行股票或存托凭证试点的若干意见) on 30 March, paving the way for the increased use of Chinese depository receipts for equity financing purposes.

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