The connection will allow Shanghai-listed Chinese companies to apply to be admitted to trading on a newly formed Shanghai Segment of London Stock Exchange’s Main Market. Companies with a premium listing in the UK will be able to apply for admission to the Main Board of the SSE.
The Shanghai and London Stock Exchanges’ proposed new Shanghai-London Stock Connect were approved by both country’s financial watchdogs, the Financial Conduct Authority (FCA) and the China Securities Regulatory Commission (CSRC).
Launched this week, the Stock Connect scheme aims to encourage cross-border investment between the countries and provide investors and companies in the UK and China with mutual access to each other’s capital markets.
Andrew Bailey, Chief Executive Officer at FCA, commented:
“This new scheme will deepen and strengthen connectivity between the UK and China capital markets to the advantage of both countries. We both believe in the positive contribution regulators can make in international capital markets, and the new co-operation we’re announcing today will be an important contributor to the success of the scheme.”
UK-based institutional investors will now be given a broader opportunity to expose themselves to the historically restricted Chinese A-share market. The structure also comes as a unique opportunity for Chinese investors to gain exposure to international securities via an exchange located in their own country and currency.
Throughout the years, only qualified investors from Western countries were allowed to participate in the Chinese A-share market. A few months ago, Saxo Bank opened access to trade in Mainland China bonds for investors holding that title.
This new service which is available through the Hong-Kong based Bond Connect Mechanism, Bond Connect Gateway, gives investors access to 127 China bonds with CNH as a settlement currency through Saxo Bank.