HK Depositary Receipts (HDR)

Come 1 July 2008, companies already listed elsewhere in a jurisdiction acceptable to the HK authorities will be able to have their shares listed in HK by way of HK depositary receipts or "HDR". The sponsor for the HDR will either buy a batch of existing shares of the company in the home market or take a new issue of shares, and package them into a HDR which in turn will be listed in HK. This is very similar to a closed ended fund consisting of shares in a single company.

The idea is that a company that has met the listing requirement's of a regulated exchange will be able to list its shares without going through the whole application process for a new listing. This gets around the requirements of some countries that restrict their companies from listing on overseas markets. For example, many Russian listed companies have listed on the London Stock Exchange by way of "GDR's". A key requirement though is that the home market must be regulated to a similar level as HK.

Members of IOSCO, the international federation of securities regulators, have signed a multi-lateral memorandum of understanding (MOU) which would make it easier to regulate across boundaries. Therefore, companies listed in those markets will find it easier to list HDR's in HK. However, it seems that the demand comes mostly from companies whose home markets are still developing and therefore will not have been able to reach the requirements set out in the multi MOU.