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June 18, 2019

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Home » Business » Finance

Landmark deal allows UK and China to sell shares

By Huang Yixuan | 00:00 UTC+8 June 18, 2019 | Print Edition

BRITAIN and China began selling shares in each other’s companies yesterday under a groundbreaking agreement, the United Kingdom’s Treasury announced, as London looks to remain a leading financial center post-Brexit.

The London-Shanghai Stock Connect marks the first time that any foreign company will be able to list in China’s mainland. The announcement was the centrepiece of the China-UK Economic and Financial Dialogue, the Treasury said.

Britain’s finance minister Philip Hammond was hosting China’s Vice Premier Hu Chunhua and a delegation “to discuss multilateral and bilateral economic issues, financial services cooperation, and trade and investment.”

“London is a global financial center like no other, and today’s launch is a strong vote of confidence in the UK market,” Hammond said.

“Stock Connect is a groundbreaking initiative, which will deepen our global connectivity as we look outwards to new opportunities in Asia.”

Fang Xinghai, vice chairman of the China Securities Regulatory Commission, said at the Lujiazui Forum in Shanghai last week that “the further development of the London-Shanghai Stock Connect scheme can allow foreign companies to raise funds on the Chinese market.”

The link-up allows investors to trade across London and Chinese time zones and ultimately raise fresh capital, although unlike UK companies, not every Chinese-listed firm is eligible to take part.

“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 China, through international trading and settlement practices,” the UK Treasury explained.

“Stock Connect will not require any direct trading infrastructure links.”

There are almost 1,500 companies listed in Shanghai, including more than 260 potentially eligible to take part in Stock Connect and list in London.

Catherine McGuinness, policy chief for the City of London financial district, described the agreement as “good news for the UK, China and the wider global economy.”

“Innovation is key to London maintaining its position as a leading international financial hub,” she said.

Huatai Securities Co Ltd, one of the largest brokerages in China, efficiently launched on the London market on the same day, becoming the first company to trade via the London-Shanghai Stock Connect project.

Huatai’s US$1.69-billion GDR listing on the Connect segment of the London Stock Exchange marked the largest UK listing since 2016 and the largest GDR offering in the UK since 2012, according to JP Morgan.

A global depository receipt is a bank certificate issued in more than one country for shares that are in a foreign company.

The GDR listing offers international investors access to the highly liquid domestic Chinese A-share market for the first time, with a fungible instrument traded on an international exchange.

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