Stock Connect Opens UK And China Stock To Both Markets
Stock Connect means it’s now possible to trade UK shares in China and vice versa. The Chancellor, Philip Hammond, announced on 17 June that UK companies listed on stock markets will become the first foreign businesses to be listed in China.
The new London-Shanghai Stock Connect initiative goes live on 17 June, meaning UK listed shares can be freely traded within mainland China, and Chinese listed shares can be traded in the UK.
About Stock Connect
With Stock Connect listings companies have the ability to place shares in both the London and Shanghai stock markets. This way UK companies are open to investments from Chinese buyers, and both China and the UK will have the ability to raise capital in their respective countries.
Mr Hammond says: “Stock Connect is a groundbreaking initiative, which will deepen our global connectivity as we look outwards to new opportunities in Asia. London is a global financial centre like no other, and today’s launch is a strong vote of confidence in the UK market.”
This project has been four years in development, and businesses will be able to use depositary receipts when they make dual listings. These receipts are a type of certificate representing ordinary share ownership.
These certificates enable foreign nationals to purchase share ownership in listed businesses without running risks typically associated with investments in overseas stocks, like currency differences or varying accountancy practices. The first Chinese brokerage shares to become available to UK investors are listed on Huatai. Companies listed in Shanghai will be potentially eligible to take part in the project and list in London.
Emerging Markets
The Stock Connect project will enable UK investors to fund some of the emerging businesses in China’s market. It’s anticipated that China will have over $17 trillion in AUM (assets under management) by the year 2030, which has grown from just $2.8 trillion in the year 2016.
This new project has risen out of the EFDs (Economic and Financial Dialogues) regularly held between the UK and China, the latest of which takes place on 17 June.
Philip Hammond states: “Our economic and financial relationships with countries like China are key to our global future, and this tenth EFD will see the golden era of relations between our two countries further strengthened. The size of China’s economy makes it a vitally important trading partner and a significant player in tackling many global challenges. Our EFD with China will emphasise market access for UK companies and cooperation on shared global challenges, like decarbonisation, that benefit all of us“.
The UK has tripled Chinese exports since the year 2008 when the first EFD took place, and the market is now valued at £23.1bn. EFDs are also held with India and Brazil on a regular basis.