China to Forge Ahead With Shanghai-London Stock Connect With Action Plan

China to Forge Ahead With Shanghai-London Stock Connect With Action Plan

Xu Zuwei & Liao Shumin

Date: Wed, 07/11/2018 - 20:58 / source:Yicai
China to Forge Ahead With Shanghai-London Stock Connect With Action Plan
China to Forge Ahead With Shanghai-London Stock Connect With Action Plan

(Yicai Global) July 11 --  Chinese policymakers are working toward opening the Shanghai-London Stock Connect this year, and the deed is included in the Chinese city's action plan comprising of 100 measures aimed at further opening up the domestic markets.

Some 32 of these measures involve the financial sector, state-backed The Paper reported Li Jun, deputy director of the Shanghai Municipal Financial Service Office, as saying. Li gave two specific factors that may affect the outcome of the bourse collaboration plan.

The Shanghai-London Stock Connect program will adopt Chinese depositary receipts, which will be designed based on listed stocks in Shanghai and London. The CDR scheme unveiled in the A-share market is developed for quality, innovative companies. Whether these two types of firms will be different and whether the capital markets will rebound will both affect the rollout of the stock connect scheme, Li said, adding that he believed that the capital markets will undergo a process of healthy development.

Modeled on American Depositary Receipts, CDRs let foreign-listed companies trade some shares on China's mainland bourses. The scheme is aimed to repatriate some of China's tech giants' stocks.

Fang Xinghai, vice chairman of the China Securities Regulatory Commission, said at Lujiazui Forum on June 14 that institutional arrangements for the Shanghai-London stock connect program are already in place and the program is set to be rolled out within this year.

The Shanghai-London scheme launch has been delayed by two particular time-related factors that arose in the study more than two years ago. First, with an eight hour time difference, the London Stock Exchange opens when the Shanghai bourse closes, causing a question about which stock prices should be used for transactions. Secondly, European bourses use a settlement period that is 24 hours shorter than China's A-share market, which requires transactions to be handled during the same day.

Editor: Emmi Laine 

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Keywords: Shanghai-London Stock Connect, CDR, Chinese Depositary Receipts, Securities, A-share Market