Thanks be to China: Zurich quickly makes it to the top in IPOs | Markets | 12/19/2022
In the ranking of the most important European locations for stock exchange listings this year, Zurich has quickly risen to the top, trumping both London and Amsterdam. This is thanks to equity issues from China.
Around 2.7 billion US dollars were raised this year through IPOs in Switzerland, as shown by data compiled by Bloomberg – the volume was larger only in Frankfurt.
Swiss stock exchange takes advantage of US-China tensions
All but one IPO in Zurich are share issues by Chinese companies. In view of the tensions between Beijing and the USA, battery manufacturers GEM and Gotion High-Tech, among others, decided to tap into the European financial market. While the stock issues have come into stocks globally, Switzerland possesses of its position as a neutral country. It gives listed companies from China the opportunity to collect funds from foreign investors.
The expansion of the Shanghai-London Stock Connect system acts as a turbo
Listings have also been accelerated by this year’s expansion of the Shanghai-London Stock Connect system, which accepts cross-border deals for companies already listed in mainland China. It not only connects the British capital with the Chinese financial center, but now also includes Shenzhen, Switzerland and Germany.
Frankfurt received none of this cake
However, since the program was expanded, Frankfurt has not yet recorded a single listing of Global Depositary Receipts. The Main metropolis only owes its position ahead of Zurich to the 9.4 billion euro IPO of Porsche AG, the largest IPO in Europe for more than a decade.
Switzerland on the move
China deals push Zurich up in the European listing ranking
Chinese IPOs in Switzerland have been criticized in some circles for not attracting European investors or Western banks on a large scale. Most companies from the People’s Republic rely on both consultants and shareholders from their home country.
arbitrage opportunity
“Chinese banks are touting these listings in the sign as arbitrage opportunities, selling new listings in Zurich at a discount to shareholders in China,” Andreas Bernstorff, head of equity capital markets at BNP Paribas, told Bloomberg.
Western banks are left out
“As long as western banks are not involved and the deals are not marketed to local investors, these IPOs will not have any real impact on European capital markets,” said Bernstorff. However, it is to be expected that larger and more liquid offers will come onto the market.
outlook
The Chinese solar system manufacturer Longi Green Energy Technology will be giving DDRs in Zurich as early as the first half of next year. It would be the largest Swiss listing by a Chinese company since the country’s regulators began to interest companies in considering equity offerings in Switzerland, Bloomberg News reported in November.
Good prospects for 2023
The bigger the transactions, the more western institutions are likely to get involved with bankers. “The market has traditionally been managed by smaller transactions, which is why Chinese banks are dominating bookrunning,” said Mandy Zhu, UBS Group’s head of China, Global Banking. “As larger DDR deals come into the market, we will do more transactions.” (KB)