Shanghai-London Stock Connect scheme to roll out this year

The much-anticipated Shanghai-London Stock Connect scheme is expected to take effect in 2018 and the mode will be different from the Shanghai-Hong Kong Stock Connect scheme, the business news website yicai.com reported on Wednesday.

The delay in the launch was due to some technical problems such as time-zone difference and market maker arrangement, an insider close to London Stock Exchange told yicai.com.

With eight-hour time difference, when London Stock Exchange opens, Shanghai Stock Exchange closes, so how to make it feasible for investors of China and Britain to buy stocks of each other is a problem for experts of the two countries to work on.

With different transaction mode from the Shanghai-Hong Kong Stock Connect scheme, the Shanghai-London Stock Connect scheme is a cross-boundary investment channel, so we will design a special mechanism which allows Chinese investors to buy stock in LSE market during non-trading hours, according to Xavier Rolet, former CEO of London Stock Exchange.

China's A-share market uses T+1 transaction mechanism and stock markets in Europe and the US use T+0 transaction mechanism, so how to solve the problem caused by transaction mechanism difference is of top priority when conducting cross-boundary transaction, said Fang Fang, vice-director of Shanghai Stock Exchange's transaction department.

The London branch of Shanghai Clearing House (SCH) was established on March 22 and as the first overseas branch of SCH, it has played an important role to solve problems in connecting Shanghai and London stock markets.

Andrew Parmley, Lord Mayor of the City of London, said in early 2017 that the Shanghai-London Stock Connect scheme had passed the first stage's feasibility study and when the second stage's deep mechanism study completed, it could take effect.

Many progresses have been achieved in technical level after longtime in-depth study but the exact date to launch the program is yet to be revealed.

The governments of the two countries agreed to accelerate the final preparations for the scheme and to review the timeline for its launch when conditions permit, according to the policy outcomes of the Ninth China-UK Economic and Financial Dialogue released by the Ministry of Finance in December 2017.

The Shanghai-London Stock Connect was jointly advanced by the governments of China and the UK in 2015. It aims to accelerate the opening-up of China's financial market, and is expected to be conducive to capital market cooperation between China and the UK.

Currently, the Shanghai-Hong Kong Stock Connect scheme launched in November 2014 is the first and the only market that Western investors can be connected to Chinese stock market but with limitations. If the Shanghai-London Stock Connect takes effect, London will become the first Western market to establish such a connect.