A flagship tie-up between the London and Shanghai stock exchanges, which would have allowed for cross-border listings, has been halted, according to financial insiders. This is another piece of collateral damage from the deepening diplomatic crisis around the current situation in Hong Kong.
Despite both countries’ governments remaining tight-lipped, officials at the Shanghai exchange, as quoted by Reuters, state that the scheme has been postponed, with no timetable for its resumption.
The End of the Golden Era?
The London-Shanghai Stock Connection was launched in 2015 and hailed by then-UK Prime Minister David Cameron and Chinese President Xi Jinping as the start of a new “golden era” between the two nations. It allowed companies listed on one exchange to apply to sell shares on the other. However, bureaucratic hold-ups meant its official start was delayed until June 2019.
A Slow Start
The first Chinese group to take advantage of the scheme was the part state-owned brokerage, Huatai Securities, listed on the Shanghai exchange. It raised $1.54 billion through selling depository receipts on the London Stock Exchange in June. In November, the Chinese state-owned hydropower company SDIC Power announced it too would use the scheme, but subsequently said its plans had changed due to market conditions. No UK listed company has yet decided to take part.
The UK government hailed the scheme as a groundbreaking initiative as part of a broader strategy to strengthen economic ties between the UK and China. However, traders and investors have always expressed doubts, citing practical trading issues such as the two-day settlement period for trades and the eight-hour delay between the two markets as barriers. The lack of regulatory transparency in Chinese markets is also a concern.