China Pacific Insurance Inches Closer to London GDR Sale

China Pacific Insurance Group Co. is moving closer to issuing global depository receipts on the London Stock Exchange and becoming the second Chinese company to offer shares through a connect program linking London and Shanghai.

China Pacific, already listed in Shanghai and Hong Kong, won approval from the China Banking and Insurance Regulatory Commission to offer global depository receipts (GDRs) in London via the Shanghai-London Stock Connect, the company said Thursday. The deal is still pending approvals from domestic and British securities regulators as well as exchange operators in Shanghai and London.

China Pacific unveiled the plan in September to sell GDRs representing as many as 629 million of its Shanghai-listed shares, or 10% of its A-share capital. The proceeds will be used to replenish capital and fund overseas development, the insurer said at that time, without giving a timeline for the transaction.

The program linking the exchanges was launched last June, enabling certain companies listed on either bourse to issue depository receipts on the other. So far, Shanghai-listed Huatai Securities, one of China’s largest brokerages, is the only company to complete a deal under the system. Huatai raised $1.54 billion in mid-June by selling about 80 million GDRs.

China Pacific’s announcement spikes market rumors of a possible freeze on the stock connect program. In December, Shanghai-listed power company SDIC Power Holdings Co. said it decided to postpone a London offering citing market conditions only one month after the company disclosed its GDR offering plan. The move sparked speculation that the stock connect program was halted by Chinese authorities, although China’s foreign affairs ministry and securities regulator denied that was the case.

Chang Depeng, spokesman of the China Securities Regulatory Commission (CSRC) told media in January that the program was still on and that companies’ decisions on timing of issuance were based on their own judgments.

“Shanghai-London Stock Connect is an important initiative in China’s financial opening,” Chang said. “It helps to expand cross-border investment and bilateral financing channels.” The CSRC will continue to improve the connect mechanism and strengthen cross-border regulatory cooperation, he said.

Shenwan Hongyuan Securities said the GDR issuance will introduce more overseas investors to China Pacific, improving the company’s shareholding structure and strengthening corporate governance.

China Pacific’s Shanghai-listed shares closed down 0.13% Thursday while its Hong Kong traded stock lost 1%.

Contact reporter Han Wei (weihan@caixin.com) and editor Bob Simison (bobsimison@caixin.com)

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