As many as 260 companies listed on the Shanghai Stock Exchange could qualify for securities issuance in London via the newly launched Shanghai-London Stock Connect initiative.
The official sign-unveiling ceremony for Shanghai-London Stock Connect (沪伦通) was held in London on 17 June at 8:00 am local time, just prior to the commencement of the 10th Sino-UK Economic and Financial Dialogue.
Unlike Shanghai-Hong Kong Stock Connect, which allows investors in both locations to purchase securities directly on either bourse, Shanghai-London Stock Connect will only allow Shanghai investors to indirectly hold London stocks via depository receipts.
Companies listed on the Shanghai Stock Exchange (SSE) will be able to raise funds on the London Stock Exchange (LSE) via the issuance of global depository receipts (GDR), which can be exchanged for existing stocks.
London-listed companies will only be able to sell Chinese depository receipts (CDR) to investors in Shanghai, which are linked to existing securities.
China and the UK first commenced research into the feasibility of the Shanghai-London Stock Connect initiative back in 2015. While the initiative was originally scheduled to launch at the end of 2018, technical issues led to a six-month delay.
Shanghai-listed companies hoping to issue GDR’s in London are required to have an average market capitalisation of 20 billion yuan (approximately USD$2.9 billion) for the 120 trading days prior to application, which makes around 260 Chinese enterprises potentially eligible.
Huatai Securities announced on 11 June that it had obtained approval from UK authorities for GDR issuance, before subsequently revealing on 14 June that it had scheduled issuance for 20 June at USD$20.50 per security to raise $1.692 billion.