There were high hopes when China and Switzerland unveiled a stock scheme linking the two countries in July 2022. Matching capital-hungry mainland corporates with capital-rich European investors via the medium of Switzerland-listed global depository receipts (GDRs) seemed a perfect match.
The plan sparked enthusiasm when first launched – and for good reason. Swiss-listed GDRs could offer foreign funds direct access to listed mainland corporates. In turn, they gave Chinese firms a chance to tap up global investors while swerving the need to sell shares in New York – a handy bonus given the threat of rising Sino-US tensions.
At first, the China-Switzerland Stock Connect looked like a hit. In stark contrast to the Shanghai-London Stock Connect, which since 2018 has completed just four GDR sales, the new corridor quickly gained traction.
In the 18 months after its inception, 50 Chinese companies sold depositary receipts. Of the total, 17 firms completed listings, raising $5.58 billion, according to data from Dealogic.
Post-regulation, issuers must reckon with the heightened complexity of execution
The structure offered a pragmatic solution for corporates in both jurisdictions.
