Shanghai-London Stock Connect paves a new way for international capital to tap into the world’s second-largest economy
Product name：Shanghai-London Stock Connect
SHANGHAI, Nov 2, 2018 - (ACN Newswire) - China and the UK have been working hand-in-hand for the Shanghai-London Stock Connect from initial feasibility study to final launch, which is expected to be at the end of 2018. In 2015, on the occasion of Chinese President Xi Jinping's state visit to Britain, the two countries started the initiative with a joint declaration of support for a stock connect program.
Three years later, the PBOC governor, Mr. Yi Gang, announced at the 2018 Bo'ao Forum in his first international public address as governor a series of detailed measures to further open up China's financial market which include the removal of foreign ownership caps for banks, easing equity restrictions on foreign investment in securities and fund companies, quadruple of daily quota on the Hong Kong-Shanghai and Hong Kong-Shenzhen stock connect schemes as well as aiming to launch Shanghai-London Stock Connect within this year. All these measures signify China's continuing efforts on market reform and opening up of its financial markets to foreign investors as well as to facilitate enterprises in China to expand globally.
CSRC, the regulator for China's securities industry soon rolled out a trial implementation document - "Provisions on the Supervision and Administration of Depository Receipts under the Stock Connect Scheme between Shanghai Stock Exchange and London Stock Exchange" in August 2018, and efficiently finalized the details of the relevant rules and regulations (the "Provision") in October 2018.
The Shanghai-London Stock Connect program is a two-way depository receipts program that allows eligible listed companies in Shanghai Stock Exchange and London Stock Exchange to list depository receipts overseas which are backed by and fungible with issuers' shares listed in their home markets. The program will enhance the international influence and capital strength of Chinese enterprises and improve their corporate governance structures. In addition, this newly established cross-border direct trade channel would pave a new way for international capital to tap into the A-share market and to enjoy the upside of China' growth story.
To qualify as the first batch of Chinese issuers to list on the London Stock Exchange through GDR offerings under the Shanghai-London Stock Connect program, applicants must be listed on the Shanghai Stock Exchange with a minimum market capitalization of RMB20 billion, which sets the bar for sizable blue-chip companies in China.
The Provision specifies that domestic listed companies can offer cross-border GDRs backed by and fungible with existing or newly-issued A-shares. The free conversion between GDRs and underlying A-shares is subject to a lock-up period of 120 days from the date of listing. Unlike the Hong Kong stock connect scheme which only allows investors to invest stocks in secondary market, or D-shares listed on the Frankfurt Stock Exchange which are not inter-fungible to A-shares, Shanghai-London Stock Connect achieves both mutual cross listing and capital raising in primary markets and fungibility in securities trading in secondary market and lays solid foundation for better connectivity between the financial markets in China and the UK.
With the details of relevant rules and regulations in place, the London debut of the first Chinese GDR is highly anticipated.
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Shanghai-London Stock Connect