Chinese firms told to list in London
• Drive to exploit stock market links with Britain and strengthen global ties to fund recovery
China is urging domestic companies to look at listing in London, several sources say, as the country aims to revive deals under a Stock Connect scheme and strengthen overseas ties in the wake of the coronavirus crisis.
China is urging domestic companies to look at listing in London, several sources say, as the country aims to revive deals under a Stock Connect scheme and strengthen overseas ties in the wake of the coronavirus crisis.
The Shanghai-London Stock Connect scheme, which began operating in 2019, aims to build links between Britain and China, help Chinese companies expand their investor base and give mainland investors access to UK-listed companies.
ORIGINAL PLAN
The original plan was for several companies to take part in the scheme in the first couple of years, but so far only one company, Huatai Securities, made the trip from Shanghai to London last June.
But now Chinese authorities have given the go-ahead for China Pacific Insurance and SDIC Power to move ahead with their London-listing plans, the sources said, after both deals were halted last year.
They also gave the nod to China Yangtze Power to begin preparations for a secondary listing on the London Stock Exchange, the sources said, speaking on condition of anonymity as the matter is confidential.
In a statement after publication of the report, the Shanghai Stock Exchange said it had been continuously promoting the Shanghai-London Stock Connect scheme that benefits both companies and investors.
The exchange added that offshore listings under the scheme are “companies’ own decisions based on their development needs and market conditions”, while the timing of a London listing by SDIC or China Pacific Insurance is also subject to approval from regulators in Britain.
The China Securities Regulatory Commission and China
Pacific Insurance did not respond to requests for comment. SDIC Power and China Yangtze Power declined to comment. The London Stock Exchange declined to comment.
Under the London-Shanghai Connect Scheme, first announced in 2018, Chinese companies are allowed to add a secondary listing of global depositary receipts in Britain that would be linked to shares in Shanghai.
The sources, including officials from banks, the Chinese government and exchanges, said that the aim is to push for a resumption of listings under the Stock Connect scheme as China seeks to improve global ties and help to fund its postlockdown recovery.
“In the second half of this year, we could see one or maybe two Chinese companies list in London,” said one of the sources, who is closely involved in the process.
“China is among the first countries to come out of lockdown, and is keen to get back on track with plans to improve trade relations with the UK,” the source said.
SENTIMENT
Anti-China sentiment in the US on several fronts and the troubles surrounding US-listed Chinese coffee chain Luckin Coffee may have made the route to New York harder to navigate.
In the London-Shanghai listings pipeline, China Pacific Insurance is likely to be the first Chinese company to make its London debut in 2020, seeking to raise $2bn-$3bn, and could price the sale in September or October, a second source said.
China Yangtse Power is another sizeable listing that could raise $2.5bn from a deal equivalent to about 5% of its share capital, the source added.
The listings will not necessarily be an easy sell in the current environment, said a third source, a London-based banker involved in some transactions.
“The IPO [initial public offering] market is likely to remain shaky for a good while yet, and these are not ‘need-to-own’ assets. Investors will already be busy supporting the companies in their portfolio and are likely to be selective,” the banker said.
The market for initial public offerings has been all but shut since the virus outbreak, which has hit global economic growth, wreaked havoc on stocks and pushed market volatility to its highest in years.
Many companies have been raising funds in secondary markets to keep businesses going through lockdowns.
But during the first quarter of 2020 there were only eight new listings, the lowest number since 2009, Refinitiv data showed.
THE INITIAL PUBLIC OFFERING MARKET IS LIKELY TO REMAIN SHAKY FOR A GOOD WHILE, AND THESE ARE NOT ‘NEED-TOOWN’ ASSETS