The Shanghai-London stock connect is expected to be officially launched around the yearend of 2018, as the China Securities Regulatory Commission rolled out the draft regulations for the connect on Oct. 12.
The Shanghai-London stock connect is a cross-boundary investment channel that connects the Shanghai Stock Exchange and the London Stock Exchange, for allowing companies listed in each bourse to trade stocks on the other market.
Chinese companies listed in the Shanghai Stock Exchange can raise funds in the London Stock Exchange through Global Depository Receipts (GDRs) while companies listed in London could trade their stocks in Shanghai, in the form of Chinese Depository Receipts (CDRs).
Chinese securities analysts said the Shanghai-London stock connect would benefit the A-share market in the long run as it opens to more overseas capital.
For companies in China, they can broaden their fundraising channels by directly raising funds in the London stock connect. In the meantime, the scheme is favorable for them to expand business abroad, the Shanghai Stock Exchange said.
As part of an effort to further open up China’s financial market, the program is believed to accelerate the progress of the internationalization of the Renminbi.
“The initial stage of the program will be mainly composed of institutional investors, and their value-oriented investment approach will influence domestic investors,” said Wang Jun, an analyst from the Hua Chuang Securities, “Blue-chip stocks will become more popular in the future.”
Wang said the correlation between China and the UK’s stock markets is low, and the international risk management skills and measures will be beneficial to China’s stock market in the long-term.
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