Stock link opens, joins two global capital hubs

2019-06-18
China Daily

The long-awaited Shanghai-London Stock Connect was finally launched in London early on June 17, offering more opportunities for British and Chinese financial institutions to buy into each others’ economic development.

The connect, a two-way depository receipt mechanism, brings together one of the world’s largest domestic capital markets - the Shanghai Stock Exchange - with one of the world’s leading international markets - the London Stock Exchange.

Brokerage Huatai Securities became the first A-share company to list in Britain via the mechanism.

The Shanghai-London Stock Connect will allow global investors to benefit from China’s stable economic growth and ongoing reforms through London, while companies listed through the London Stock Exchange will be able to access Chinese investors directly through the stock connect.

It is the first time foreign companies will be able to list in the Chinese mainland and the first time SSE-listed companies will be able to raise capital abroad through instruments exchangeable with their domestic shares.

International investors will be able to access China A-shares through international trading and settlement practices as part of a mechanism.

“The hugely ambitious Shanghai-London Stock Connect has been one of the most highly anticipated bilateral initiatives in recent years. It could prove to be a game changer in deepening United Kingdom-China financial cooperation and expanding access to China’s capital markets,” said Catherine McGuinness, City of London Corp policy chairwoman.

Innovation is key to London maintaining its position as a leading international financial hub. Linking a huge capital market with this international financial center is good news for the UK, China and the wider global economy, she said.

“It means global investors can now benefit from China’s growth through London, while UK listed companies are able to access Chinese investors directly,” she added.

“The stock connect has raised China’s capital market opening-up onto a new level, as the connect will open both sides’ markets not only to investors, but to listed firms as well,” said Dong Dengxin, director of the Finance and Securities Institute at Wuhan University of Science and Technology.

China rolled out the Shanghai-Hong Kong Stock Connect in 2014 and the Shenzhen-Hong Kong Stock Connect in 2016, which gave mainland and Hong Kong investors access to each other’s stocks.

“Unlike its predecessors, the Shanghai-London Stock Connect will also enable public firms to list on the other bourse, which will help them increase international brand awareness and enlarge investors’ scope,” Dong said.

Shanghai-London Stock Connect has been developed jointly by Shanghai Stock Exchange and London Stock Exchange Group, with the support of both the Chinese and UK governments and in collaboration with regulatory authorities.