Caixin
Jan 04, 2020 04:31 AM
FINANCE

China Denies Halting Shanghai-London Stock Connect Program

The China Securities Regulatory Commission said the Shanghai-London Stock Connect is operating as normal. Photo: IC Photo
The China Securities Regulatory Commission said the Shanghai-London Stock Connect is operating as normal. Photo: IC Photo

China denied news reports that a struggling stock connect program between the Shanghai and London stock exchanges was halted.

Several news outlets including Bloomberg and Reuters reported Thursday that new listings through the Shanghai-London Stock Connect were blocked by Beijing, possibly on political grounds. Reuters, citing public officials and people working on potential Shanghai-London deals, said Britain’s stance over the Hong Kong protests was one of the issues that prompted the move. In October the British government called the concerns of the city’s residents “legitimate.”

Chang Depeng, spokesman of the China Securities Regulatory Commission (CSRC) said the media reports were not based on truth.

The operation of Shanghai-London Stock Connect has been normal since its inception in June, Chang said Friday at a media briefing. The regulator noticed some companies delaying issuance of global depositary receipts (GDRs) and respects their decision on timing of issuance based on financing needs and market conditions, he said.

“Shanghai-London Stock Connect is an important initiative in China’s financial opening,” he said. “It helps to expand cross-border investment and bilateral financing channels.” The CSRC will continue to improve the connect mechanism and strengthen cross-border regulatory cooperation, he said.

The Shanghai-London Stock Connect Program was launched June 17, enabling certain companies listed on either bourse to issue depositary receipts on the other. So far, only one company has listed through the program – Chinese brokerage Huatai Securities Co. Ltd., which raised $1.54 billion in June from the sale of global depositary receipts in London.

After the news report, Huatai’s GDRs tumbled as much as 11% Thursday, the biggest decline since their listing.

At a separate routine press conference Thursday, China’s Foreign Ministry spokesperson Geng Shuang responded to questions on the media reports that the stock connect program was temporarily halted because of political tensions with Britain. He said he wasn’t aware of the specific situation but stressed that China hopes the U.K. will provide a fair, just, open and nondiscriminatory business environment for Chinese enterprises and create enabling conditions for practical China-U.K. cooperation in various fields.

Several Chinese companies have express interest in listing through the connect program, but none has actually done so. Chinese power company SDIC Power Holdings Co. in early December postponed its plan to sell GDRs because of “market conditions.”

China Pacific Insurance in September announced a plan to become the second Chinese company to list its GDRs on the London Stock Exchange. The company hasn’t talked about a change of plans, but there has been no further update since September.

Contact reporter Denise Jia (huijuanjia@caixin.com)

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