event:
On December 24, the China Securities Regulatory Commission (“CSRC”) promulgated the administrative provisions of the State Council on the overseas issuance and listing of securities by domestic enterprises (Draft for comments) (the “administrative provisions”) and the administrative measures for the filing of overseas issuance and listing of domestic enterprises (Draft for comments) (the “Filing measures”).
comment:
We will bring overseas securities issuance under unified supervision and make up for system weaknesses and regulatory deficiencies
Since this year, the regulatory system for overseas securities issuance by domestic enterprises has attracted extensive attention from investors. The administrative provisions and filing measures have made corresponding system repair and improvement according to the latest regulatory situation at home and abroad and the new characteristics of listed companies. On the whole, the principle is to encourage domestic enterprises to raise funds abroad without setting additional thresholds and conditions, and support legally compliant domestic enterprises to use overseas capital markets for financing development. From the specific regulatory objectives, the overseas listing activities were fully incorporated into the supervision, the filing management was implemented, and the regulatory rules on vie structure, accounting system, safety audit and other aspects for overseas listed enterprises were supplemented. The details are as follows: first, integrate direct and indirect overseas listing into the scope of filing management, and clarify the definition standards of overseas listing activities and subjects. Domestic enterprises issuing shares (IPO, DPO, spac, etc.), depositary receipts, corporate bonds convertible into shares or other equity securities abroad, or listing and trading their securities abroad are within the scope of this supervision. Second, clarify the filing requirements, and domestic enterprises shall perform the filing procedures for overseas issuance and listing.
Clarify the identification standards of indirect listing and strengthen in-process and post event supervision
The main modes of indirect listing of enterprises include shell buying, spin off, listing of holding companies, etc. the filing measures clarify that the identification of overseas indirect issuance and listing of domestic enterprises shall follow the principle of substance over form, and shall be comprehensively identified in combination with the proportion of domestic asset income and profit, composition of senior executives and place of business operation. The detailed rules include: (I) the operating revenue, total profit, total assets or net assets of domestic enterprises in the latest fiscal year account for more than 50% of the relevant data in the issuer’s audited consolidated financial statements in the same period. Whether the standard of financial statements in the fiscal year is domestic or overseas remains to be clarified; （2） Most of the senior managers in charge of business operation and management are Chinese citizens or their habitual residence is located in China, and the main place of business activities is located or mainly carried out in China.
Establish a regulatory red line and set up a “negative list”
Establish a regulatory red line, and the administrative provisions legally determine the listing qualification examination and financing provisions for overseas financing of some listed companies. According to Article 7 of the administrative provisions, Overseas issuance and listing shall not be allowed under the following circumstances: (1) where listing and financing are explicitly prohibited by laws and regulations, we believe that discipline training institutions may be within this scope; (2) According to the relevant competent authorities under the State Council, overseas issuance and listing threaten or endanger national security. We believe that some Internet companies with a large amount of data should be audited by relevant audit institutions in accordance with the provisions of the network security law and the digital security law. (3) There are major ownership disputes over equity, main assets, core technology, etc; (4) Domestic enterprises and their controlling shareholders and actual controllers have committed criminal crimes of corruption, bribery, misappropriation of property, misappropriation of property or suspected of undermining the order of the socialist market economy in the past three years, or are being filed for investigation by judicial organs because of suspected crimes or suspected of major violations of laws and regulations; (5) Directors, supervisors and senior managers have been subject to administrative punishment and the circumstances are serious in the last three years, or are being filed for investigation by judicial organs for suspected crimes or are being filed for investigation for suspected major violations of laws and regulations; (6) other circumstances recognized by the State Council.
Clarify the filing process, strengthen in-process and post event supervision, and standardize the management of overseas securities service institutions
The management regulations strengthen in-process and post event supervision. For the change of control, investigation and punishment by overseas regulatory authorities, active delisting or compulsory delisting, it is required to report the specific situation in time within 3 working days from the date of relevant events. In addition, it regulates the due diligence of overseas securities companies on domestic enterprises and other issues related to entry practice, and makes it clear that overseas securities companies engaged in the recommendation business of overseas issuance and listing of domestic enterprises or acting as the lead underwriter shall report to the CSRC for the record.
Investment suggestions:
The administrative provisions and the filing measures regulate and unify the system of overseas securities issuance by Chinese enterprises. In principle, they insist on encouraging domestic enterprises to raise funds abroad without setting additional thresholds and conditions, support domestic enterprises that comply with the law to use overseas capital markets for financing development, and clarify that the policy of two-way opening of capital markets has not changed, It is conducive to reducing the policy uncertainty of “zhonggai shares” investment and stabilizing investors’ recognition of the long-term investment value of “zhonggai shares”.
The acceleration of capital market opening is good for the securities industry. In the short term, under the catalysis of “spring agitation”, securities companies with high performance growth rate and undervalued value have higher allocation cost performance. In the medium term, the fundamentals of the securities industry continue to improve, and the performance is expected to maintain steady growth. In the long run, under the background of the in-depth promotion of capital market reform, the securities industry is at a historic turning point. Under the catalysis of factors such as the steady upward roe of securities companies, we maintain the “overweight” rating of the securities industry. From the perspective of individual stocks, we believe that the differentiation of the industry pattern in the past 22 years will intensify. We recommend leading securities companies and securities companies with competitive advantages in investment consultants, derivatives markets and other segments.
Risk tip: the economic recovery is less than expected; Policy reform lags behind.
