(Yicai Global) Nov. 9 -- Domestic investors may settle transactions using depositary receipts in the Shanghai-London Stock Connect through existing yuan common stock accounts (A-share accounts), with no need to set up new ones, China Securities Depository and Clearing said yesterday.
Beijing-based CSDC, a semi-governmental clearinghouse in which the Shanghai and Shenzhen bourses are 50 percent shareholders, released a list of Investor questions and answers in its Registration and Settlement of Depositary Receipts for CSDC guidelines, Shanghai-London Stock Connect, on its official website yesterday.
Two kinds of these vouchers are used in the stock connect, Chinese depositary receipts and global depositary receipts, per the Q&A. The former is for companies listed on London's stock exchange and the latter for those on the Shanghai bourse. The market trading of CDRs and the funds involved are all settled in yuan, however.
Investors with Chinese depositary receipts hold instruments issued by a depository bank for overseas basic securities, while the holders of these are the depositaries. An investor thus does not appear in the list of shareholders of the overseas listed company, but shares are instead recorded in the name of depositories or their entrusted custodians.
This does not affect an investor's exercise of shareholder rights, however. The depository must pay bonuses and dividends to the holder of the depositary receipts and exercise voting rights based on the holder's will, per the provisions of their agreement.
CSDC will distribute cash bonuses and compensation funds for basic stock buybacks, stock offerings, rights offerings, public placements, stock splits and mergers and online voting at the request of a depositary holder, it said.
Investors may, however need to pay various fees, including transaction stamp duties, dividend and bonus income taxes, and securities transaction supervision and service fees.
Editor: Ben Armour