The effect of full circulation on the stock price is not obvious.
is to revitalize assets and follow the trend.
On April 13, the China Securities Regulatory Commission disclosed that it has received the “full circulation” application materials of unlisted shares in the domestic H-share company of Zhongan Online.
H share index refers to the company ’s registered place in the country, and when going to Hong Kong for listing, the domestic operating entity is directly used as the listing entity, rather than re-registering the holding company abroad. And use it as a red-chip model of the listing subject.
For H-share listed Zhongan Online and other companies, the shares of its domestic operating entity are composed of two parts-the shares held by shareholders before the listing, Also called domestic shares, they are settled in RMB and cannot be circulated on the Hong Kong Stock Exchange; the shares issued to foreign investors by the IPO, namely foreign shares, are settled in Hong Kong dollars.
In order to improve the circulation of domestic shares of H-share companies, the full-circulation pilot work was started in 2018. After the pilot of the H shares full circulation of three companies, Lenovo Holdings (03396.HK), AVIC (02357.HK) and Weigao (01066.HK), was completed, in November 2019, the China Securities Regulatory Commission announced that the H The reform of the full circulation of shares allows the conversion of “domestic shares” to “foreign shares”.
CITIC Construction Investment believes that the full circulation of H shares can increase the liquidity of H-share related companies, which in turn facilitates the increase of the weight of H shares in the international market index. Incremental funds also benefit the company’s various shareholders’ equity and improve corporate governance, which can enhance the company’s valuation. This is also the expectation of ZhongAn online application for full circulation. As of the last trading day of Hong Kong stocks (April 9), the total market value of Zhongan Online was 39.907 billion Hong Kong dollars, and the unmarketed market value was 26.6 billion Hong Kong dollars. It accounts for about 68%.
However, the specific impact of H-share full circulation on the company is even moreMostly reflected in the short term. Taking Lenovo Holdings as an example, after it passed the full-circulation pilot approval on April 23, 2018, 880 million domestic shares were listed for trading. Its H-share circulation ratio and circulation market value increased significantly, and its stock price closed up for three consecutive days. But in the long run, the impact of stock price volatility is not obvious, and it is the company’s fundamentals that dominate stock price fluctuations.
Another thing to note is that after the H shares are fully circulated, domestic shareholders will receive equity reductions, equity pledges, etc. The company may usher in a wave Reduce holdings. However, the major shareholders of state-owned enterprises are cautious about mass selling, and a sharp reduction in holdings is not easy to happen.
With the H-share full circulation reform and the promulgation of specific rules, it is also a general trend for H-share companies to apply for full circulation. Before ZhongAn Online, five H-share listed companies have filed “full circulation” applications in the International Department of the China Securities Regulatory Commission, namely Zhaojin Mining (01818.HK), Tianbao Energy (01671.HK), and Jinma Energy (06885. HK), Blu-ray Garbo Services (02606.HK), R & F Properties (02777.HK).