The long-awaited London-Shanghai Stock Connect that links the two markets has been launched today, letting UK and Chinese companies sell shares on each others’ stock markets in a pioneering scheme.
It marks the first time any foreign company will be able to sell its shares in mainland China, and comes as the nominally communist country steps up market deregulation and seeks to better integrate itself into global finance.
Four years in the making, and later than many expected, the Stock Connect is ready in time to become the centrepiece of today’s UK-China Economic and Financial Dialogue (EFD).
Chancellor Philip Hammond will host Chinese vice premier Hu Chunhua and a Chinese delegation in London to discuss economic ties between the countries.
The Stock Connect allows Shanghai-listed firms to raise new funds in London while British companies are limited to selling existing shares, meaning they cannot raise money in the Chinese financial centre.
The Treasury said over 260 of the firms listed in Shanghai are potentially eligible for a second listing in London. Meanwhile UK-listed companies have the opportunity to access deep pools of capital in China.
Unlike the existing Hong Kong-Shanghai Stock Connect, which lets investors directly buy stocks on the two markets, the London scheme will only let foreign buyers hold stocks indirectly through instruments called depository receipts (DRs).
Investors will from today have the chance to buy 75m global DRs in Chinese brokerage Huatai Securities at $20.50 each. It is the first Chinese group to list in London as part of the connection.
Launching the Stock Connect at the London Stock Exchange (LSE), Chancellor Philip will say: “Today’s launch is a strong vote of confidence in the UK market.”
“Stock Connect is a ground-breaking initiative, which will deepen our global connectivity as we look outwards to new opportunities in Asia,” he will say.
Catherine McGuinness, City of London Corporation policy chair, said the initiative “has been one of the most highly anticipated bilateral initiatives in recent years”.
“It could prove to be a gamechanger in deepening UK-China financial cooperation and expanding access to China’s capital markets,” she said.
She added: “It means global investors can now benefit from China‘s growth through London, while UK listed companies are able to access Chinese investors directly.”