China stops stock link with Britain due to political tensions
Chinese authorities have temporarily blocked planned cross-border listings between the Shanghai and London stock exchanges due to political tensions with the UK, sources familiar with the situation told Reuters..
The suspension of a project to link the Shanghai and London stock exchanges casts a shadow over its future, aimed at forging links between the UK and China, helping Chinese firms expand their investor base and giving mainland investors access to UK-listed companies.
Sources, which include government officials and individuals working on potential Shanghai-London deals, all said the suspension was due to political tensions..
Two of them highlighted the UK’s position on the Hong Kong protests, and one pointed to remarks about the detention of a current former employee at her consulate in Hong Kong..
All five sources were involved in negotiations with Chinese officials and spoke to Reuters on condition of anonymity because they are not authorized to speak about it publicly.
British companies and banks involved in this scheme are closely monitoring how the newly elected Prime Minister Boris Johnson approaches relations with Beijing and how he takes a position on Hong Kong, which is mired in incessant protests..
China blames unrest in Hong Kong, heavily backed by anti-government movements seeking to curb Beijing’s control, interference by foreign governments, including the United States and Britain.
The China Securities Regulatory Commission and the Shanghai Stock Exchange did not respond to requests for comment. A spokesman for the London Stock Exchange and a spokesman for the UK Treasury declined to comment.
China’s Foreign Ministry said in a facsimile statement that it was not aware of the specifics, but added that «hopes the UK can provide a fair and impartial business environment for Chinese companies that invest in the UK and create an appropriate environment for both sides». countries should freely pursue practical cooperation in various fields».
The Stock Connect project, which started last year, was conceived as a way to improve the UK’s relationship with the world‘s second largest economy, and China saw this as an important step in opening up its capital markets as well as bringing them together globally..
Huatai Securities became the first Chinese company to use this scheme in May, SDIC Power will be the second to list global depositary receipts (GDRs) in London, representing 10% of its share capital.
However, the deal with the alternative energy operator was delayed at a progressive stage and SDIC Power cited market conditions as the main reason..
Sources say SDIC Power’s deal has been suspended due to Beijing’s suspension of Stock Connect.
Another large company, such as China Pacific Insurance, which one source said could have closed the deal as early as the first quarter of 2020, has also been asked to freeze its cross-border listing plans, they added..
«This is not only a serious blow to companies looking to expand their investor base through listings in London, but also to China’s links to global markets.», – one of the sources who worked on one of the transactions with global depositary receipts told Reuters.
Problems with this scheme arise at the wrong time for Britain, which is seeking to forge ties with non-EU countries as it prepares to leave the European bloc.
According to Refinitiv, the London Stock Exchange had its worst year in terms of new listings in a decade, driven by political instability and concerns over Brexit, discouraging the accumulation of funds in the stock market..