London-Shanghai Stock Connect launches in the UK

Huatai raises US$1.7 billion as it becomes first company to list on scheme that allows Chinese and British investors to gain access to each other's capital markets

London Stock Exchange
London Stock Exchange

The Shanghai-London Stock Connect scheme was launched on Monday at a ceremony at the London Stock Exchange (LSE). The scheme is a reciprocal arrangement between the Shanghai and London stock exchanges that enables mutual access for investors and companies in China and the UK to each other’s capital markets.

A memorandum of understanding was also signed that provides the basis for regulatory co-operation to support the scheme.

Chinese brokerage Huatai Securities raised as much as US$1.7 billion in a London listing and became the first company to list through the connect program. It will sell global depositary receipts (GDR) representing about 10 percent of its outstanding share capital.

The long-awaited scheme allows Chinese investors a rare opportunity to gain exposure to international securities via an exchange in their own country and currency, while British institutional investors can gain exposure to the Chinese A-share market. This is the first time that international companies will be able to get listed in mainland China.

Shanghai-listed Chinese companies can apply to admit to be traded on a newly established Shanghai Segment of the LSE’s main market while companies with a premium listing in the UK will be able to apply for admission to the main board of the Shanghai Stock Exchange.

Unlike the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect schemes, investors in the London-Shanghai Stock Connect link do not trade stocks directly and are only able to trade depository receipts instead.

All the securities traded through the scheme will be in the form of depository receipts.

The scheme was first announced in 2015 and was initially intended to be launched in December 2018 before being delayed due to uncertainty over Brexit, according to media reports.

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Date

17 Jun 2019

Channel

Capital Markets

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