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China Pacific Insurance said it plans to list its global depository receipts (GDR) on the London Stock Exchange, becoming the second Chinese company to tap the UK's financial marketplace since the June launch of a cross-border investment channel with Shanghai.
The size of the surrogate securities will represent no more than 628.67 million underlying shares of China's fourth-largest insurer by value, or up to a 10 per cent stake, with the proceeds earmarked for funding the insurer's overseas growth and for replenishing its capital, Pacific Insurance said in a statement to the Shanghai Stock Exchange, where its A shares had been trading since 2007.
The proposal, already approved by the insurer's board, is still pending approval of shareholders and regulators in China and the UK, Pacific Insurance said without elaborating.
The GDR sale could be valued at between 11 billion yuan (US$1.55 billion) and 20 billion yuan, according to an estimate by Founder Securities, putting it in place to surpass Huatai Securities' US$1.69 billion GDR sale in June.
Pacific Insurance's "GDR flotation will help to introduce overseas shareholders [to the insurer], improve corporate governance and boost operating efficiency," said Founder's analyst Zuo Xinran. "It will also help to expand its overseas presence and achieve multifold business development."
Pacific Insurance's GDR offering is a boost to the Shanghai-London Stock Connect, a cross-border investment channel that was set up in June to let Chinese investors buy London-listed stocks, and for global traders to access China's biggest equity market via London.
For now, the Shanghai-London Stock Connect boosts a single member in the form of Huatai, a brokerage based in the Jiangsu provincial capital of Nanjing. Huatai's London GDRs have gained 18 per cent since they kicked off the Connect programme in June.
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Still, the nascent Connect programme appears to be a source of pride for London Stock Exchange. In a September 13 rebuff to an unexpected takeover bid by Hong Kong Exchanges and Clearing Limited (HKEX), the London bourse's chairman Donald Robert said Shanghai would be the UK's "preferred and direct channel to access the many opportunities with China.
While London is seeking to woo listings of Chinese companies through the link programme with Shanghai, Hong Kong is struggling to retain its title as the global hub for initial public offerings, with the fallout of the social unrest spilling over to the finance sector.