Fri, Jan 03, 2020 - Page 10 News List

China-UK tensions halt Stock Connect

POLITICS:Two sources highlighted Britain’s stance over the protests in Hong Kong and one pointed to remarks over the detention of its former consulate staff member

Reuters, HONG KONG and LONDON

People take part at a lunchtime protest outside the HSBC headquarters in Hong Kong yesterday.

Photo: Reuters

China has temporarily blocked planned cross-border listings between the Shanghai and London stock exchanges because of political tensions with Britain, five sources have said.

Putting the Shanghai-London Stock Connect scheme on hold casts a shadow over the future of a project meant to build ties between Britain and China, help Chinese firms expand their investor base and give Chinese investors access to UK-listed companies.

The sources, who include public officials and people working on potential Shanghai-London deals, all said that politics was behind the suspension.

Two of them highlighted Britain’s stance over the Hong Kong protests and one pointed to remarks over the detention of a now former staff member at its consulate in Hong Kong.

All five sources have been involved in talks with Chinese officials and spoke to reporters on condition of anonymity, because they are not authorized to speak about the matter publicly.

British companies and banks involved in the scheme are watching closely how recently elected British Prime Minister Boris Johnson approaches relations with Beijing and what stance he takes on the Hong Kong protests.

China blames the Hong Kong unrest, heavily supported by pro-democracy advocates seeking to curb controls by Beijing, on interference by foreign governments, including the US and Britain.

The China Securities Regulatory Commission and the Shanghai Stock Exchange did not respond to requests for comment. Spokespeople for the London Stock Exchange and the British Exchequer declined to comment.

The Chinese Ministry of Foreign Affairs said in a faxed statement that it is not aware of the specifics, but added that it “hopes Britain can provide a fair and unbiased business environment for Chinese companies that invest in Britain and create the appropriate conditions for both countries to carry out practical cooperation smoothly in various fields.”

Stock Connect, which began operating last year, was devised as a way of improving Britain’s relationship with the world’s second-biggest economy and was seen as a major step by China to open up its capital markets, as well as linking them globally.

Huatai Securities Co (華泰證券) was the first Chinese firm to use the scheme in May, with SDIC Power Holdings Co Ltd (國投電力) set to become the second last month, with a listing of global depository receipts (GDRs) in London representing 10 percent of its share capital.

However, the alternative energy operator’s deal was postponed at an advanced stage, with SDIC Power citing market conditions as the main reason.

Five sources have said that SDIC Power’s deal was halted due to Beijing’s suspension of Stock Connect.

Other hopefuls such as China Pacific Insurance Group Co (中國太平洋保險), which one of the sources said could have launched a deal as early as this quarter, have also been told to put their cross-border listing plans on ice, they added.

SDIC Power and China Pacific Insurance did not respond to requests for comment.

“It’s not only a big blow to the companies looking to broaden their investor base via listings in London, but also to China’s links with global markets,” said one source, who has worked on one of the GDR deals.

The trouble with the scheme comes at a bad time for the London Stock Exchange and for Britain, which is eager to build ties with non-EU countries as it prepares to leave the eurobloc.

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