Shanghai-London stock link blocked amid HK strife

Top News | REUTERS 3 Jan 2020

Chinese authorities are said to have blocked planned cross-border listings between the Shanghai and London stock exchanges because of political tensions with Britain over Hong Kong.

Suspending the Shanghai-London Stock Connect scheme casts a shadow over the future of a project meant to build ties between Beijing and London, help Chinese firms expand their investor base and give mainland investors access to British-listed companies.

Public officials and people working on Shanghai-London deals said politics is behind the suspension.

Two people highlighted Britain's stance over the Hong Kong protests, and one pointed to remarks over the detention of a now former staff member at its consulate in Hong Kong.

British firms and banks involved in the scheme are watching closely how recently elected Prime Minister Boris Johnson approaches relations with Beijing and what stance he takes on protest-stricken Hong Kong.

China blames the Hong Kong unrest largely on interference by foreign governments, including the United States and Britain.

Officers of the China Securities Regulatory Commission and the Shanghai Stock Exchange were silent on the situation, and representatives of the London Stock Exchange and Britain's Finance Ministry declined to comment.

But China's Ministry of Foreign Affairs said while it was not aware of specifics it hopes Britain "can provide a fair and unbiased business environment for Chinese companies that invest in the United Kingdom and create conditions for both countries to carry out practical cooperation in various fields."

The stock connect, which began operating last year, was devised as a way of improving Britain's relationship with the world's second biggest economy and was also seen as a major step by Beijing to open up its capital markets and link them globally.

Huatai Securities was the first Chinese company to move on the scheme in May, with SDIC Power set to become the second in December with a listing of global depository receipts in London representing 10 percent of its share capital.

But SDIC's deal was postponed at an advanced stage, with the alternative energy operator citing market conditions as the main reason. However, five sources said SDIC's deal was halted because of Beijing's suspension of the stock connect.

And other hopefuls such as China Pacific Insurance, which looked set to launched a deal in this year's first quarter, have been told to put cross-border listing plans on ice.

"It's not only a big blow to the companies looking to broaden the investor base via listings in London but also to China's links with global markets," said a source who has worked on one of the GDR deals.

Trouble with the scheme comes at a bad time for Britain, which is keen to build ties with non-European Union countries as it prepares to leave the bloc.

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