Shanghai-London Stock Connect: Operating Mechanism, Opportunities, and Challenges

TY - JOUR

T1 - Shanghai-London Stock Connect

T2 - Operating Mechanism, Opportunities, and Challenges

AU - Lu, Lerong

AU - Ye, Ningyao

PY - 2019/10/1

Y1 - 2019/10/1

N2 - Shanghai-London Stock Connect (SLSC) is an innovative cross-border financial markets listing and trading mechanism linking Chinese stock market with its British counterpart. It allows Chinese public companies to issue Global Depository Receipts (GDR) to be traded on the London Stock Exchange. Similarly, UK-listed companies can issue Chinese Depository Receipts (CDR) to obtain a secondary listing on the Shanghai Stock Exchange. SLSC enables British and international investors to purchase the shares of some of the best companies in the world’s second largest economy. The market scale of GDR amounts to $2.9 trillion while the size of the CDR market is predicted to exceed $800 billion, which could generate substantial revenues for investment banks and city law firms. The threshold of issuing either GDR or CDR is relatively high as issuers have to have a minimum market capitalisation of RMB 20 billion (US$2.92 billion). More than 260 of the 1,500 Shanghai-listed companies will be potentially eligible to participate in the project. On 17 June 2019, Huatai Securities, one of China’s largest brokerages, has become the first Chinese public company to be dual-listed on the LSE via the latest SLSC. Huatai raised $1.7 billion from selling 82.5 million GDRs to international investors. HSBC is said to be the first UK company to apply for a CDR listing in Shanghai. SLSC has raised multiple technical and regulatory challenges in relation to time difference, information disclosure, investor protection, cross-border financial supervision, as well as cross-border dispute resolution.

AB - Shanghai-London Stock Connect (SLSC) is an innovative cross-border financial markets listing and trading mechanism linking Chinese stock market with its British counterpart. It allows Chinese public companies to issue Global Depository Receipts (GDR) to be traded on the London Stock Exchange. Similarly, UK-listed companies can issue Chinese Depository Receipts (CDR) to obtain a secondary listing on the Shanghai Stock Exchange. SLSC enables British and international investors to purchase the shares of some of the best companies in the world’s second largest economy. The market scale of GDR amounts to $2.9 trillion while the size of the CDR market is predicted to exceed $800 billion, which could generate substantial revenues for investment banks and city law firms. The threshold of issuing either GDR or CDR is relatively high as issuers have to have a minimum market capitalisation of RMB 20 billion (US$2.92 billion). More than 260 of the 1,500 Shanghai-listed companies will be potentially eligible to participate in the project. On 17 June 2019, Huatai Securities, one of China’s largest brokerages, has become the first Chinese public company to be dual-listed on the LSE via the latest SLSC. Huatai raised $1.7 billion from selling 82.5 million GDRs to international investors. HSBC is said to be the first UK company to apply for a CDR listing in Shanghai. SLSC has raised multiple technical and regulatory challenges in relation to time difference, information disclosure, investor protection, cross-border financial supervision, as well as cross-border dispute resolution.

KW - China

KW - Chinese economy

KW - Shanghai-London Stock Connect

KW - Financial Regulation

KW - Financial Law

KW - Stock Market

KW - Capital markets

KW - Securities Regulation

KW - Initial Public Offering

KW - IPO

KW - Chinese Depositary Receipt

KW - Global Depositary Receipt

KW - Shanghai Stock Exchange

KW - London Stock Exchange

KW - Corporate Finance

M3 - Article

SN - 0269-2694

VL - 34

SP - 684

EP - 687

JO - BUTTERWORTHS JOURNAL OF INTERNATIONAL BANKING AND FINANCIAL LAW

JF - BUTTERWORTHS JOURNAL OF INTERNATIONAL BANKING AND FINANCIAL LAW

IS - 10

ER -