Date
16 September 2019
The Shanghai-London Stock Connect allows Shanghai-listed companies to issue shares via London’s stock market while British firms can broaden their investor base by selling shares in Shanghai. Photo: Reuters
The Shanghai-London Stock Connect allows Shanghai-listed companies to issue shares via London’s stock market while British firms can broaden their investor base by selling shares in Shanghai. Photo: Reuters

Why Shanghai-London stock link won’t be a threat to HK

The long-awaited Shanghai-London stock connect went live on Monday, fueling fears that Hong Kong would lose its special status as an investment window into China.

But the Shanghai-London stock connect is not the same thing as the Shanghai/Shenzhen-Hong Kong Stock Connect, although the two have similar names.

One key point is mainland China and the United Kingdom have seven to eight hours of time difference: the trading hours of the two markets simply don’t overlap.

The Shanghai-London link is closer to the American Depositary Receipts (ADRs) scheme in Hong Kong, which allows Hong Kong-listed companies to issue shares in the United States.

Through this Shanghai-London link, Shanghai-listed companies can issue shares via London’s stock market while British companies can broaden their investor base by selling shares in Shanghai.

However, past experience shows trading interests in depositary receipts of foreign stocks are often quite low, as local investors have little knowledge and interest in these unfamiliar foreign companies.

For those who are keen to invest, they would normally seek a more direct channel.

In the future, there could be a chance for the Shanghai-London link to evolve into something like its Hong Kong counterpart, but basic issues like time gap and regulatory differences are difficult to resolve, at least in the near term.

This article appeared in the Hong Kong Economic Journal on June 18

Translation by Julie Zhu

[Chinese version 中文版]

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RT/CG

Hong Kong Economic Journal columnist