Caixin
Sep 07, 2021 06:16 AM
FINANCE

China May Expand Stock Connect Programs to Hong Kong and London

Shanghai and Shenzhen stock data on a screen outside a Shanghai building Feb. 1, 2021.
Shanghai and Shenzhen stock data on a screen outside a Shanghai building Feb. 1, 2021.

China is studying an expansion of the stock connect program linking the mainland and Hong Kong exchanges and improvements to the Shanghai-London stock connect program as a way of further opening the capital markets to foreign investors, the country’s top securities regulator said Monday.

Yi Huiman, chairman of the China Securities Regulatory Commission (CSRC), made the comments Monday at a conference organized by the World Federation of Exchanges.

China will expand the supply of international products in commodities and financial futures, promote the establishment of a qualification certification mechanism for overseas employees, and provide fairer, more efficient and more convenient services for overseas institutions and investors to participate in China’s capital market, Yi said.

In addition, authorities will pursue pragmatic cooperation with foreign regulators on overseas-listed Chinese companies and cross-border audit and enforcement, Yi said. The U.S. threatened to delist Chinese companies whose audits cannot be inspected by an American audit watchdog.

The CSRC continues to monitor and study whether China’s market can accommodate initial public offerings through special purpose acquisition companies, or SPACs, and novel IPO models such as direct listing, Yi said.

A SPAC is a blank-check company that exists solely to raise money by selling shares on a stock exchange. The funds are then used to acquire another company. In the U.S. last year, 248 initial public offerings involved SPACs, four times more than in 2019, according to SPAC Research. The total so far this year is 340, raising $107 billion.

Hong Kong stock exchange will hold a public consultation in the third quarter on whether to allow SPACs. Singapore Exchange Ltd. became the first Asian financial hub to allow blank-check companies to sell shares in the city-state.

Chinese President Xi Jinping announced plans Thursday for a new national stock exchange in Beijing. Yi said China will accelerate the establishment of a system to facilitate the capital markets to serve innovative small and midsize enterprises (SMEs).

SMEs are at a difficult stage, facing multiple challenges such as the pandemic, rising commodity prices and disrupted supply chains, Yi said. Supporting and developing SMEs is an important task for the recovery of the global economy, he said.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com)

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