The US-China technology war aside, SMIC has a practical reason for delisting from New York: its ADRs are hardly traded

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The number of ADRs traded everyday on average were 10 per cent of the transactions in Hong Kong, even in the first eight months of SMIC’s simultaneous listings in New York and Hong Kong in 2004

In the last five years, the gap had widened to three ADRs in New York for every 1,000 SMIC shares in Hong Kong

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Workers dressed in dust-proof clothing at the 12-inch wafer plant of Semiconductor Manufacturing International Corporation (SMIC) in Beijing on 27 August 2012. Photo: Handout

Zhang Shidongin Shanghai

Published: 12:28pm, 27 May 2019Updated: 4:12am, 3 Feb 2021

Semiconductor Manufacturing International Corporation (SMIC), China’s largest chip maker, has a practical reason for its plan to delist from the New York Stock Exchange: Its American Depositary Receipts (ADRs) are nary traded.

The average daily transaction of the Shanghai-based chipmaker’s ADRs in a year never surpassed 10 per cent of the number of SMIC’s shares that change hands in Hong Kong since the two financial instruments listed on the same day in 2004. In the last five years, the ratio widened to three ADRs for every 1,000 SMIC shares that changed hands in Hong Kong, according to South China Morning Post’s calculation using Bloomberg’s analytics.

SMIC’s announcement on Friday capped two weeks of tumultuous news in global technology, as the year-long US-China trade war looked set to spill over into a new battlefront over technology. US President Donald Trump ordered US technology companies to stop supplying their hardware, software and services to Chinese companies on national security grounds, seen as a thinly veiled assault on Huawei Technologies, the world’s largest maker of 5G telecommunications gear.

The delisting plan also came hot on the heels of a back-to-back announcement by Shanghai’s municipal government and the Chinese finance ministry to offer tax breaks, financial incentives and funding to nurture China’s home-grown chip producers to ensure the industry’s self-sufficiency.

“The delisting comes at a sensitive time and will lead to a lot of speculations,” said Ken Chen Hao, a strategist at KGI Securities in Shanghai. “In the home market, SMIC is actually a company with lot’s of exposures to analysts’ coverage, and many analysts recommend this company on road shows.”