卓纬管理合伙人朱宁律师受访Financial Management杂志

2019-07-24

近日,卓纬管理合伙人朱宁律师受访Financial Management,就沪伦通相关问题发表看法。以下为采访全文:
 
London and Shanghai make Stock Connect listing link
 
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Chancellor of the Exchequer Philip Hammond clapsduring a ceremony for the London-Shanghai Connect project launch in London, 17June 2019.

A recent collaboration between the London Stock Exchange Group and the Shanghai Stock Exchange, supported by the UK and Chinese governments and regulators, will allow foreign companies for the first time to list in mainland China.

It is also the first time that Shanghai-listed companies will be able to raise capital abroad through instruments fungible with Chinese domestic shares.

More than 260 companies out of a total of almost 1,500 listed in Shanghai could take advantage of the initiative and list in London.

The Shanghai-London Stock Connect was described by UK Chancellor of the Exchequer Philip Hammond as increasing the UK’s global connectivity as it looks “outwardsto new opportunities in Asia”.

Don Robert,London Stock Exchange Group chairman, said in a press statement that the Shanghai-London Stock Connect allows “established Chinese issuers to raisecapital from London’s global liquidity pool and global investors to accessChina A-share instruments from outside Greater China”.

He added that established London-listed issuers will also be able to benefit from access to“China’s deep capital markets”. 

The project hastaken four years’ work. No new dedicated infrastructure links between the twostock exchanges have been needed — companies can list on both exchanges usingdepositary receipts, which are certificates representing ordinary sharesownership.

Chinese investors also will benefit from Stock Connect, said Aleksandar Stojanovic,Ph.D., professor and head of the accounting and finance department at the UK’sUniversity of Greenwich. “If they have the opportunity to buy CDRs [Chinesedepositary receipts], they can do this in local currency and based on localregulations, so they don’t have to do anything acrobatic to access the LondonStock Exchange.”

Other Chineseconnections

The Shanghai-London Stock Connect isn’t the first linking of a mainland Chinesestock exchange with an international one. Both the Shanghai Stock Exchange andthe Shenzhen Stock Exchange in China are linked to Hong Kong. 

Stojanovic saidthat China had been able to access international capital through its Hong Konglinks, “but not as widely as London would provide, especially in terms ofinstitutional investors and hedge funds”.

Depending onfuture regulatory moves by China, he said London “could be a significant sourceof international capital for Chinese companies”.

Because of the proximity of Hong Kong and Chinese companies’ and investors’ greater familiarity with Hong Kong’s business environment, it has been the go-to for Chinese companies, said Zhu Ning, managing partner at Beijing-based law firmChance Bridge Partners.

Chinese companies are now looking at the legal requirements for issuing shares on the London Stock Exchange and the related policies of the London market, sheexplained.

Willow Wei, apartner at Dentons law firm in Shanghai, warned that CFOs would need toconsider the increased compliance costs because of the different rules in thetwo markets. Culture was also a consideration, she said. “[The] London-Shanghaiinvolves two cultures of different jurisdictions … investors may have differentinvestor behaviours.”

Technology board

Perhapseclipsing the announcement of Stock Connect is the new Nasdaq-style technologyboard on the Shanghai Stock Exchange. The new tech board “will enable moreChinese companies to be listed domestically, so a lot of attention is on that”,Zhu said. According to Reuters, 120 companies had already applied to list onthe board.

Forinternational investors interested in investing into China via theShanghai-London Stock Connect, Zhu advises CFOs to understand the differencesbetween Chinese companies’ reporting standards and those in Hong Kong andWestern markets.

“The truth is,there are many good companies in China and they have good potential,” she said.“I’ve seen that the younger management teams tend to have a good vision when itcomes to international markets.”

Zhu said that the current phase will be more experimental for companies both in China and the UK. “Companies and investors will need time to make sense of how this canwork.”

Listing requirements

By listingglobal depositary receipts (GDRs) in London, Shanghai-listed companies need tofulfil certain criteria. These include:

§ Having a minimum $2.9 billion (RMB 20 billion) market capitalisation;

§ Obtaining China Securities Regulatory Commission approval;

§ Any new shares raised need to be listed in Shanghai.

In order to list CDRs in Shanghai, issuers need to fulfil criteria that include:

§ Have a minimum $2.9 billion (RMB 20 billion) market capitalisation;

§ Be listed on the London Stock Exchange for at least threeyears — with at least one year in the premium segment of the main market;

§ Issue a minimum of 50 million units of CDRs representing RMB 500 million worth of underlying shares;

§ Hold or acquire sufficient underlying shares (for CDRs,raising new capital is not allowed).

Companies willneed to meet the listing — and ongoing — requirements relating to the two markets. This means that the China Securities Regulatory Commission would need to approve London Stock Exchange-listed companies that wanted to list in Shanghai. Conversely, the Financial Conduct Authority would regulate the listof Chinese companies listing in London。

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