Positioning Chinese Companies to investors active on the SIX GDR market

Andrés Luther , Partner Hirzel.Neef.Schmid.Counselors

In 2022 the first Chinese companies listed in the form of a GDR on the SIX Swiss exchange as part of China-Switzerland Stock Connect.

So far there have been nine companies listed. An overview of these can be found?here.

Currently trading liquidity is still low, and investor demand originates from China. The??GDR listing banks are mostly, if not exclusively, Chinese based banks.

The current focus has been very much on the listing process and not on the positioning and marketing of the newly listed companies.. To create a liquid market, it will be critical to put in place active and transparent communications, and at the same time??carefully??position the companies, their business models and strategies, and to showcase their management teams.

What is the goal?

To increase?liquidity by creating demand from international investors. The target??investor base are??Swiss and EU institutional investors, in addition to???UHNWI and HNWI investors who retain assets in Switzerland.?

How to achieve this?

Educate international investors about China-Switzerland Stock Connect. Switzerland offers a dynamic market which combines institutional investors (funds, pensions funds, insurers) and wealth management (managed portfolios, family offices).?

Key considerations are:

• Ensure state-of-the-art transparency, disclosure and investor engagement: Global investors typically value companies that regularly provide transparent and accurate information about their financial performance and business operations. The updates could be communicated to investors through both earned and owned channels, including investor relations websites and newsletters.
• Regularly communicate with Swiss-based investors to help them understand the latest developments of the business environment in China, as well as the corporate culture of Chinese companies, to avoid any misperceptions and misunderstandings.
• Ensure state-of-the-art corporate governance: Good corporate governance practices, such as having independent directors and effective oversight of companies by the board of directors, can help increase investor confidence and improve a company's capital market positioning.?
• Build a strong brand and competitive capital markets positioning, explain the competitive positioning, products and services and the equity story, identify the best suited investors, build a trusted relationship between company, management and investors.
• It helps hugely if companies are active in European B2B and B2C markets.

The listing is much more than a transaction. It is the beginning of a long-term positioning and engagement with investors and the public.

Chinese companies which list in Switzerland via GDR’s will do well to provide best-in-class disclosure and comprehensive communication. They will achieve a much more long-term and strategic engagement with shareholders. This in turn increases predictability and reduces volatility, which should ultimately have a positive impact on valuation and reputation.

Companies which succeed in this will benefit in terms of their capital market positioning and their positioning with clients.?Thoughtful capital market positioning is a virtuous circle.