LONDON: The head of London’s stock market has for the first time revealed details of how the proposed link between the London and Shanghai exchanges will bridge the time difference between the UK and China.
The planned London-Shanghai stock connect is a “new concept” in cross-border trade links, that will use a system of specially designated brokers to enable Chinese investors to buy and sell shares listed on the UK bourse outside its trading hours, said Xavier Rolet, chief executive of the London Stock Exchange.
Brokers and analysts have previously expressed concerns about the feasibility of the scheme because of practical difficulties presented by the eight-hour time difference between the two cities. The London market opens after the Shanghai exchange closes, and there is no overlap in trading hours.
“The London-Shanghai stock connect would be completely different from the stock connect between Hong Kong and Shanghai. This is a new concept of stock connect to allow Chinese investors to trade London-listed stocks after the London market closes,” said Rolet in an exclusive interview with the South China Morning Post at the London exchange headquarters.
Under the proposed mechanism, the London Stock Exchange would select a group of the top London-listed companies to be traded by mainland Chinese investors during Shanghai’s market trading hours. The London exchange would appoint designated brokers to act as market makers, while trades would be cleared and settled in Shanghai.
Likewise, Shanghai Stock Exchange will select a group of mainland companies to be traded on the London Stock Exchange via appointed market makers.
The system differs greatly from the Hong Kong-Shanghai stock connect, where the two markets are in the same time zone and have trading hours that largely overlap.
“The London-Shanghai stock connect will help promote globalisation,” said Rolet. “It will create a new bridge to connect the markets, allowing listed companies to be traded by more investors, and providing them with more investment choice.
“In the longer term, the companies will be able to raise funds in different markets via these connect schemes.
“The London-Shanghai Stock Connect is a very important project for both China and the UK. Both governments are very supportive of the link up and there are some big Chinese banks and brokers interested in the scheme.”
The British Chancellor of the Exchequer, Philip Hammond, last Friday announced that the London-Shanghai stock connect would proceed to the second stage, where details of regulatory and other issues would be examined.
