HONG KONG: China published rules for a cross-listing program between exchanges in Shanghai and London, clearing the way for companies to press ahead with plans to debut on each other’s bourses.
Eligible firms will have to meet thresholds and will be limited in how many shares they can issue, the China Securities Regulatory Commission said in a statement Friday, without giving details. Investors can swap their London-listed depositary receipts for company stock 120 days after a new listing, down from six months in previous draft rules. The regulations also limit the difference in the issue price between the depositary receipts and their underlying stock.
“We welcome the shorter conversion period,” said Gary O’Brien, head of clearing and custody product at BNP Paribas SA in Hong Kong. “This shows the authorities are truly listening to the needs of investors when designing the scheme” and that they want to increase participation, he said.
The link, which has been in the works since 2015, is another part of the push by Chinese authorities to connect their capital markets with the rest of the world. In recent weeks, regulators have made it easier for foreigners to trade the nation’s bond market, Premier Li Keqiang vowed to speed up financial opening, and FTSE Russell added Chinese-listed shares to its global benchmarks.
President Xi Jinping is pushing ahead with longstanding pledges to liberalize the financial sector in the face of a worsening trade relationship with the U.S., which has seen President Donald Trump and his administration criticize China for gaining what they see as unfair advantages in global commerce.
Overseas firms issuing depositary receipts in China will need a minimum market value of 20 billion yuan ($2.9 billion), according to a separate consultation document from Shanghai Stock Exchange issued on Friday, thresholds that were in earlier proposals. London Stock Exchange companies listing in Shanghai will need to issue depository receipts with a value of at least 500 million yuan, the document said. The consultation is open for comment until Oct. 19.
Huatai Securities Co., China’s third-largest brokerage by value, has said it plans to list in London using the link. The program may be operational as early as Dec. 3, China’s state-run Shanghai Securities News reported in September, without saying where it got the information. - Bloomberg
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