UK, China Securities Watchdogs Back Joint Stock Market Link

Daniel Fowler
June 20, 2019

Companies listed in Britain will be able to sell shares in China today with the launch of a long-awaited London-Shanghai Stock Connect project. The programs increase access to Chinese domestic stocks by foreign investors and give mainland investors the opportunity to buy certain foreign stocks, allowing for greater capital flows.

From Monday, London investors will have the opportunity to trade Global Depositary Receipts in Huatai.

In 2015, China and Britain agreed to expand financial cooperation by carrying out a feasibility study on a stock connect between London and Shanghai during the 7th China-Britain Economic and Financial Dialogue.

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British finance minister Philip Hammond called a chance to deepen "global connectivity". Foreign investors have difficulty playing directly in mainland China's stock markets because the country has traditionally barred investors from converting their currency into yuan-a fact that has helped China keep a handle on exchange rates. It means wealthier Chinese mainland investors can further diversify their risk, and some Chinese companies can-with state approval-look overseas for financing.

The UK is seeking to tap into China's growing market.

Huatai Securities Co Ltd, one of the largest brokerages in China, efficiently launched on the London market on the same day, becoming the first company to trade via the London-Shanghai Stock Connect project. China is expected to have more than $17 trillion ($13.5 trillion) in assets under management (AUM) by 2030, having had $2.8 trillion AUM in 2016.

In addition, for the time being at least, there remains a discrepancy between trading limits in the countries' stock exchanges: Shanghai has a 10 percent daily trading limit, whereas London has no limit.

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