London eyes tie-up with Shanghai exchange

It will be similar to the stock connect between Shanghai and HK bourses

BEIJING - The London Stock Exchange is considering forging a link with the Shanghai bourse like that between Hong Kong and the Chinese financial hub, state media reported yesterday.

"We are working on it and trying to understand what might be involved," said Mr Nicolas Bertrand, head of equity and derivative markets for the London Stock Exchange Group (LSE), in Beijing, according to the China Daily. It said the programme would be similar to the stock connect between the Shanghai and Hong Kong bourses.

That scheme, launched in November, enables international investors to trade selected stocks on Shanghai's tightly restricted exchange while also allowing mainland investors to buy shares in the former British colony. The tie-up was set up as part of China's move to open up its financial markets and officials said in March it will also link trading between Shenzhen and Hong Kong bourses, though the launch is still pending.

Mr Bertrand did not offer a timetable for the inauguration of such a scheme between London and Shanghai, the report said.

It added that he said such a tie-up would add more complexity to the British bourse's operations, adding it was in talks with regulators, clients and assets firms to ensure any connection could meet relevant regulatory requirements and conditions.

London is the largest Chinese yuan market outside mainland China and Hong Kong, and the LSE is aiming to launch more trading products denominated in the currency, the China Daily said. There are currently 61 Chinese companies listed in Europe's biggest financial centre and LSE officials said they are working hard at attracting more firms from China to list, it said.

Mr Jon Edwards, LSE's deputy head of primary markets and emerging markets, said it saw opportunities for Chinese firms floating overseas assets in London. Mr Bertrand also said the LSE was discussing the set-up of a mechanism for yuan-denominated global depositary receipts which will allow China's mainland-listed shares to trade via GDRs on the LSE, said the China Securities News newspaper.

Meanwhile, Chinese shares slumped more than 6 per cent yesterday afternoon as tight market liquidity caused by new share issues triggered a large sell-off, dealers said.

The benchmark Shanghai Composite Index dived 6.42 per cent, or 307 points, to 4,478.36 on turnover of 685.5 billion yuan (S$147 billion).

AGENCE FRANCE-PRESSE, REUTERS

A version of this article appeared in the print edition of The Straits Times on June 20, 2015, with the headline 'London eyes tie-up with Shanghai exchange'. Print Edition | Subscribe