Shanghai-London stock link may launch later in January

Overall preparation for the conversion system for trading stocks has been done, as China's securities companies have conducted tests three times. [Photo/IC]

The earliest time for the launch of the long-awaited Shanghai-London Stock Connect scheme might be the second half of this month, according to people who have the knowledge of the matter.

One of the major reasons has to do with the United Kingdom's impending exit from the European Union, and probably the earliest time people can expect might be in the second half of this month, according to a source who has the knowledge of the matter.

"We still need to see how the Brexit process proceeds," the source said.

Another source said late last month that negotiations on rules on regulating capital flows also played a role in the delay of the launch of the trading scheme, as the State Administration of Foreign Exchange has been concerned about possible turbulence on currency exchanges.

Overall preparation for the conversion system for trading stocks has been done, as China's securities companies have conducted tests three times, according to the source.

China's senior financial officials had said the long-awaited scheme was expected to be launched by the end of 2018.

Under the scheme, Chinese companies listed in the A-share market will be able to raise money in London, while British companies can be purchased by Chinese investors through the scheme, but they cannot raise fresh funds.

Earlier last year, Huatai Securities said the company is expected to become the first Chinese company to raise funds via the imminent stock connect scheme linking the Shanghai and London exchanges. HSBC has already revealed its plans to issue China Depository Receipts in China.

A number of companies listed in the separate markets have expressed their interest in joining the scheme, but Huatai and HSBC might be the only two of the very first batch of companies expected to be traded after the scheme goes into operation, according to people involved in the preparations.

As the fresh new scheme takes time to be tested, only a handful of companies will have IPOs in London and China in the short-term, according to Stanislas Beneteau, regional head of financial intermediaries and corporate clients at BNP Paribas Securities Services.

"This is a big deal for the UK, but don't expect the trading screens to show huge volumes on day one. Success should be measured over several years, given the moving parts: primary issuance and supporting market conditions, secondary market mechanics, as well as rules and regulations evolving over time," Beneteau wrote in a research note.