Shang­hai-Lon­don stock link may launch later in Jan­uary

China Daily - - BUSINESS - By WANG YANFEI wangyan­fei@chi­nadaily.com.cn

The ear­li­est time for the launch of the long-awaited Shang­hai-Lon­don Stock Con­nect scheme might be the sec­ond half of this month, ac­cord­ing to peo­ple who have the knowl­edge of the mat­ter.

One of the ma­jor rea­sons has to do with the United King­dom’s im­pend­ing exit from the Euro­pean Union, and prob­a­bly the ear­li­est time peo­ple can ex­pect might be in the sec­ond half of this month, ac­cord­ing to a source who has the knowl­edge of the mat­ter.

“We still need to see how the Brexit process pro­ceeds,” the source said.

An­other source said late last month that ne­go­ti­a­tions on rules on reg­u­lat­ing cap­i­tal flows also played a role in the de­lay of the launch of the trad­ing scheme, as the State Ad­min­is­tra­tion of For­eign Ex­change has been con­cerned about pos­si­ble tur­bu­lence on cur­rency ex­changes.

Over­all prepa­ra­tion for the con­ver­sion sys­tem for trad­ing stocks has been done, as China’s se­cu­ri­ties com­pa­nies have con­ducted tests three times, ac­cord­ing to the source.

China’s se­nior fi­nan­cial of­fi­cials had said the long-awaited scheme was ex­pected to be launched by the end of 2018.

Un­der the scheme, Chi­nese com­pa­nies listed in the A-share mar­ket will be able to raise money in Lon­don, while Bri­tish com­pa­nies can be pur­chased by Chi­nese in­vestors through the scheme, but they can­not raise fresh funds.

Ear­lier last year, Hu­atai Se­cu­ri­ties said the com­pany is ex­pected to be­come the first Chi­nese com­pany to raise funds via the im­mi­nent stock con­nect scheme link­ing the Shang­hai and Lon­don ex­changes. HSBC has al­ready re­vealed its plans to is­sue China De­pos­i­tory Re­ceipts in China.

A num­ber of com­pa­nies listed in the sep­a­rate mar­kets have ex­pressed their in­ter­est in join­ing the scheme, but Hu­atai and HSBC might be the only two of the very first batch of com­pa­nies ex­pected to be traded af­ter the scheme goes into op­er­a­tion, ac­cord­ing to peo­ple in­volved in the prepa­ra­tions.

As the fresh new scheme takes time to be tested, only a hand­ful of com­pa­nies will have IPOs in Lon­don and China in the short-term, ac­cord­ing to Stanis­las Beneteau, re­gional head of fi­nan­cial in­ter­me­di­aries and cor­po­rate clients at BNP Paribas Se­cu­ri­ties Ser­vices.

“This is a big deal for the UK, but don’t ex­pect the trad­ing screens to show huge vol­umes on day one. Suc­cess should be mea­sured over sev­eral years, given the mov­ing parts: pri­mary is­suance and sup­port­ing mar­ket con­di­tions, sec­ondary mar­ket me­chan­ics, as well as rules and reg­u­la­tions evolv­ing over time,” Beneteau wrote in a re­search note.

Suc­cess should be mea­sured over sev­eral years, given the mov­ing parts: pri­mary is­suance and sup­port­ing mar­ket con­di­tions, sec­ondary mar­ket me­chan­ics, as well as rules and reg­u­la­tions evolv­ing over time.” Stanis­las Beneteau, from BNP Paribas Se­cu­ri­ties Ser­vices

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