Insurer China Pacific Debuts in London Via Shanghai Stock Connect

China Pacific Insurance (Group) Co. Ltd. closed higher on its first day of conditional trading in London, as the state-owned insurance giant became the second Chinese company to list there through the Shanghai-London Stock Connect program.

China Pacific, which is already listed in Shanghai and Hong Kong, raised $1.8 billion in London on Wednesday after selling nearly 103 million global depositary receipts (GDRs) for $17.60 each. The GDRs finished the day at $17.80. Each GDR represents five Shanghai-listed shares of the company.

The Shanghai-London Stock Connect program, which was launched in June 2019, allows certain companies listed on either the Shanghai Stock Exchange or the London Stock Exchange to issue depositary receipts on the other. The program is one of China’s recent efforts to further open its financial markets to foreign investors.

China Pacific Chairman Kong Qingwei said the listing will help expand its “international presence,” according to a statement posted on the London Stock Exchange website. The company will use at least 70% of the offering’s net proceeds to develop its businesses overseas through equity investments, partnerships, and mergers and acquisitions, according to its prospectus.

The official trading will start on Monday. Investors will not be allowed to convert their GDRs into the company’s Shanghai-listed shares for 120 days, its prospectus showed.

Swiss Re Principal Investments Company Asia Pte. Ltd., a cornerstone investor in the offering, purchased nearly 29 million GDRs, or about 28% of the total. Swiss Re’s shares will be subject to a three-year lock-in period.

In June 2019, Shanghai- and Hong Kong-listed Huatai Securities Co. Ltd., one of China’s largest brokerages, became the first company to complete a listing in London through the Shanghai-London Stock Connect program. The company raised nearly $1.7 billion by selling GDRs after exercising an overallotment option.

So far, Chinese power generation companies China Yangtze Power Co. Ltd. (link in Chinese) and SDIC Power Holdings Co. Ltd. have unveiled plans to list GDRs through the connect program.

Following the success of the Shanghai-Hong Kong, Shenzhen-Hong Kong and Shanghai-London stock connect programs, China is preparing a similar one to link its stock market with Germany’s.

Chen Han, co-CEO of China Europe International Exchange AG (CEINEX), said in November that the exchange is preparing for the Shanghai-Deutsche Stock Connect, which would allow certain companies listed in either Shanghai or Frankfurt to issue depositary receipts on the other’s exchange. CEINEX is a joint venture among the Shanghai Stock Exchange, Deutsche Boerse Group and China Financial Futures Exchange Co. Ltd.

Contact reporter Tang Ziyi (ziyitang@caixin.com) and editor Michael Bellart (michaelbellart@caixin.com)

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