Shanghai-London Stock Connect to hail 2nd issue

Updated: May 11, 2020 Source: Xinhua Silk Road
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Shanghai-London Stock Connect, a program opened for trading in June 2019 as a channel for foreign capital inflow to China, is expected to witness the second global depository receipt (GDR) issuance in the foreseeable future, reported Securities Daily Friday.

China Pacific Insurance (group) Co., Ltd. (CPIC; 601601.SH) posted an announcement on May 7 saying the company has been nodded in principle by China Banking and Insurance Regulatory Commission (CBIRC) to issue and list its GDR on London Stock Exchange (LSE).

Previously in June 2019, Chinese securities broker Huatai Securities Co., ltd. (601688.SH) completed the first GDR issuance on LSE under the Shanghai-London Stock Connect program, via which stock markets between China and the Europe were interconnected.

Li Zhan, chief economist with Zhongshan Securities said CPIC, as the second likely financial institution to indirectly list on LSE after Huatai Securities, could diversify its shareholder structure and business growths via the expected GDR issues.

For China's A-share market, further enlargement in interconnectivity with external capital markets is helpful for leveling information disclosure system and culture of China's listed firms with international standards.

He Nanye, special researcher of Suning Institute of Finance deemed CBIRC's nodding in principle denoted a maturing mechanism linking the Shanghai and London stock markets after prior explorations and practices and a trend under which both investors and regulators are actively embracing market interconnectivity.

A year ago, Huatai Securities issued 82.515 million GDRs at a price of 20.50 U.S. dollars per GDR, raising in total 1.692 billion U.S. dollars. After a period of conversion restriction during June 20 and October 17 last year, prices of the company's GDRs and A-share market stocks remained relatively stable afterwards.

By May 8, price of Huatai Securities's GDRs was 25.40 U.S. dollars and it's A-share market stocks closed at 18.32 yuan per share.

Given the one to 10 conversion ratio of GDR to A shares, Huatai Securities's GDR price is highly in line with its A-share market stock price under the present exchange rates, said Li.

In Li's opinion, this means China's A-share market pricing and trading mechanism has been acknowledged by the international market and the effectiveness of the cross-border conversion mechanism and channels has been tested by the markets.

Zhao Yayun, researcher with CITIC Foundation for Reform and Development Studies noted Chinese companies had little knowledge about the London stock market although it has been nearly a year since the launch of the Shanghai-London Stock Connect program.

As attempts to attract investors, the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect programs are drawing overseas institutional investors to make value investment in the A-share market.

Editor: 赵银平