Chinese ADR Buyouts in Progress (Update)

Many pending buyouts progressed towards completion despite recent equity market volatility.  Since my last update:

New buyout offers:

Volatility in domestic Chinese stock markets could delay or disrupt completion of pending buyouts.  The CSI 300 market cap weighted index of the 300 largest Shanghai/Shenzhen listed stocks dropped 24% from year-end to its March low and then rebounded 16%:

CSI 300 040516

The highly speculative Chinext index fell 30% from its December high and then rebounded 20%:

ChiNext Chart 040516

It’s encouraging that the recent market stabilization occurred without heavy-handed government led intervention, but implementation of long-term reforms has been postponed and there is no clear path to allow dual-listing of Chinese companies currently trading in New York.  This may encourage continuation of buyouts that ultimately lead to a relisting on a domestic exchange.

Concerns over capital outflows from China could complicate the completion of some buyouts if onshore RMB funding needs to be converted to USD.  Foreign exchange regulations have not changed, but they may be more strictly enforced and bolstered with informal guidance to major financial institutions.

Balancing these factors, a majority of the currently pending deals are likely to close:

ADR Buyouts 040516

 

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