Companies listed in Britain will be able to sell shares in China on Monday with the launch of a long-awaited London-Shanghai Stock Connect project that finance minister Philip Hammond called a chance to deepen "global connectivity".
The two regulators joint announcement sets out high-level details of the scheme.The Shanghai-London Stock Connect will enable Shanghai-listed Chinese companies to apply to be admitted to trading on a newly formed Shanghai Segment ofLondon Stock Exchanges Main Market, while companies with a premium listing in the United Kingdom will be able to apply for admission to the Main Board of the SSE.
For Chinese investors, to whom the structure is a new concept, they will be able to gain exposure to worldwide securities via an exchange located in their own country and currency.
For Chinese companies to list on the LSE, it needs to meet the criteria of the minimum market capitalization of at least RMB 20 bln.
For both the United Kingdom and China, the securities traded will be in the form of depositary receipts, a common way of facilitating overseas companies access to institutional investors. It will be the first time foreign companies are able to list in mainland China, the United Kingdom government said in a statement. It is estimated that 260 companies listed in Shanghai are eligible.
Chinese brokerage Huatai was the first to debut on the London Stock Exchange on Monday. "We both believe in the positive contribution regulators can make in worldwide capital markets, and the new co-operation we're announcing today will be an important contributor to the success of the scheme". China is expected to have more than US$ 17 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.