London-Shanghai Stock Connect Launches
UK listed companies will be able to sell shares in China from today (17 June), with the launch of the London-Shanghai Stock Connect. This is the first time that any foreign company will be able to list in mainland China.
➡UK listed companies can now sell shares in China, and vice versa
➡@PhilipHammondUK launched the London-Shanghai Stock Connect @LSEplc
➡Companies will be able to dual-list on both the Shanghai & London Stock Exchanges
— HM Treasury (@hmtreasury) June 17, 2019
Investors will be able to trade across London and Chinese time zones, allowing issuers from both markets to raise capital in the other market. It will mean UK listed companies can be traded by more investors, providing investors with greater choice.
There are almost 1500 companies listed in Shanghai, over 260 of which are potentially eligible to take part in Stock Connect and list in London. It is also estimated that China will reach over $17 trillion in assets under management (AUM) by 2030, having had $2.8 trillion AUM in 2016.
The launch of Stock Connect is the centrepiece of today’s UK-China Economic and Financial Dialogue (EFD) which sees the Chancellor host Vice Premier Hu Chunhua and a Chinese delegation in London to discuss multilateral and bilateral economic issues, financial services cooperation, and trade and investment.
Launching Stock Connect’s first day of trading at the London Stock Exchange, Philip Hammond, Chancellor of the Exchequer will say:
London is a global financial centre like no other, and today’s launch is a strong vote of confidence in the UK market.
Stock Connect is a ground-breaking initiative, which will deepen our global connectivity as we look outwards to new opportunities in Asia.
The culmination of four years’ work, Stock Connect will mean, for the first time, that international investors will be able to access China A-shares from outside of Greater China, and through international trading and settlement practices. Stock Connect will not require any direct trading infrastructure links. Instead, it will allow companies to dual-list on both the Shanghai and London Stock Exchanges using Depositary Receipts (DRs).
From today, London investors will have the opportunity to trade Global Depositary Receipts (GDRs) for Huatai, the technology-enabled securities group in China.
Source: HM Treasury
Today’s market open celebrated the launch of Shanghai-London Stock Connect, a two-way depositary receipt mechanism that brings together two of the world’s largest capital markets. Learn more: https://t.co/29IE0cXn6P #stockconnect pic.twitter.com/e524O6GNyR
— London Stock Exchange (@LSEplc) June 17, 2019
London Stock Exchange Group (LSEG) today welcomes Huatai Securities, the technology-enabled securities group in China, as the first issuer using Shanghai-London Stock Connect. Huatai Securities has been admitted to trading on the Shanghai Segment of the Main Market of London Stock Exchange.
LSEG welcomed Philip Hammond MP, Chancellor of the Exchequer, and Hu Chunhua, Vice Premier of the State Council of the People’s Republic of China, along with representatives from Huatai Securities to open the London market to celebrate the listing and to mark the first day of the UK-China Economic and Financial Dialogue.
Huatai Securities raised US$1.54 billion through the sale of global depository receipts (GDRs) to international investors. The proceeds will be used to support the growth of its international business and strengthen its capital position. This is the first time that international investors have been granted access to China A-Shares on an exchange outside Greater China using international trading and settlement practices. Trading of GDRs is available on London Stock Exchange’s International Order Book. London Stock Exchange is home to over 2000 issuers from more than 100 countries.
Zhou Yi, Chairman & President, Huatai Securities:
“Shanghai-London Stock Connect is the first of its kind to directly link the Chinese and European markets and a strategic component of China’s capital markets opening up. The programme offers us access to one of the deepest and most influential capital markets in the world and provides fungibility between the GDRs and the A Shares. The offering will improve our core competitiveness by supporting the growth of our international business, further expanding our overseas footprint, and strengthening our capital position. We are pleased to be the first issuer to tap this new market of enormous potential and unprecedented opportunity.”
Don Robert, Chairman, LSEG:
“We are deeply honoured to welcome Vice Premier Hu Chunhua and Chancellor of the Exchequer Philip Hammond to open the London Stock Exchange this morning to mark the launch of Shanghai-London Stock Connect. We congratulate Huatai Securities, the first issuer to start trading through Shanghai-London Stock Connect. Shanghai-London Stock Connect brings together two of the world’s largest capital markets, allowing established Chinese issuers to raise capital from London’s global liquidity pool and global investors to access China A-share instruments from outside Greater China. Established London-listed issuers will now also benefit from access to China’s deep capital markets.
“We appreciate the support of both the Chinese and British authorities and our partnership with Shanghai Stock Exchange, which have been instrumental in bringing this ambitious project to fruition today. All parties see the long-term benefits for companies, investors and the global economy in establishing a trading link between our two markets.”
The Financial Conduct Authority (FCA) and the China Securities Regulatory Commission (CSRC) have today made a joint announcement of their approval of the Shanghai and London Stock Exchanges proposed new Shanghai-London Stock Connect. They have also published a memorandum of understanding (MoU) aimed at providing the basis for the regulatory co-operation that will support the success of the scheme.
Launching today at a ceremony at London Stock Exchange, the Stock Connect scheme is a reciprocal arrangement between the Shanghai Stock Exchange (SSE) and London Stock Exchange.It will encourage cross-border investment between the countries and provide investors and companies in the UK and China with mutual access to each others capital markets.A joint initiative of the two exchanges, the schemes development has been supported by Economic and Financial Dialogues between the UK and Chinese governments. Through todays joint announcement and through the signing of the MOU, the two countries securities regulators have now lent their support too.
The two regulators joint announcement sets out high-level details of the scheme.The Shanghai-London Stock Connect will enable Shanghai-listed Chinese companies to apply to be admitted to trading on a newly formed Shanghai Segment ofLondon Stock Exchanges Main Market, while companies with a premium listing in the UK will be able to apply for admission to the Main Board of the SSE.
In both cases, the securities traded will be in the form of depository receipts. This investment structure is a tried and tested way of enabling overseas companies to access institutional investors in global financial centres like London. However, the structure is new to China and offers Chinese investors a unique opportunity to gain exposure to international securities via an exchange located in their own country and currency.From a UK perspective, the scheme offers institutional investors a broader opportunity to gain exposure to the Chinese A-share market which has been historically restricted to those western institutions with Qualified Foreign Institutional Investor status.
Signed in Madrid at the International Organization of Securities Commissions last year, the MOU sets out a framework for co-operation between the two regulators to support the success of the scheme.Among other things it aims to protect investors and combat cross-border market abuse and other serious misconduct.
Andrew Bailey, FCAs Chief Executive commented:
‘This new scheme will deepen and strengthen connectivity between UK and China capital markets to the advantage of both countries. We both believe in the positive contribution regulators can make in international capital markets, and the new co-operation were announcing today will be an important contributor to the success of the scheme.’
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