China Pauses U.K. Listings Project

By Xie Yu

Beijing has halted a high-profile project letting Chinese companies list in London, people familiar with the matter said, in a move that could signal chillier financial relations with Britain.

The Shanghai-London Connect project has been put on hold, according to a Shanghai Stock Exchange official and a senior banker in Hong Kong. Neither gave a reason for the hiatus, which was reported earlier by Reuters.

The Connect program, which was years in the making, launched in June with a roughly $1.5 billion offering of London-listed global depositary receipts by China's Huatai Securities Co. It is separate from a larger trading scheme linking Hong Kong to Shanghai and Shenzhen.

The Shanghai-London tie-up was meant to show how China continues to embrace globalization, while simultaneously deepening London's ties with China and boosting its credentials as a financial center ahead of Brexit.

In September, when London Stock Exchange Group PLC was fending off an unwanted approach from rival Hong Kong Exchanges & Clearing Ltd., LSE Chief Executive David Schwimmer touted Shanghai's prospects as a financial hub and his group's direct links there, according to media reports.

However, relations between the two countries have been tested by unrest in Hong Kong. In November, London condemned China's treatment of a former official at Britain's Hong Kong consulate as torture, in a case tied to the protests.

It couldn't be learned how formal the hold-up was, or how long it was likely to last. A person familiar with the matter said the LSE hadn't received any notification that the system was closed or blocked, and the U.K. exchange viewed the Connect as still operational.

Likewise, another senior banker, who advises SDIC Power Holdings Co., said that while the Chinese power company believed now wasn't the right time to launch a deal, work continued on a potential listing. SDIC called off a sale of securities through the Connect program in December, blaming market conditions. This banker expressed skepticism that U.K.-China relations would derail a deal in the long run.

The Connect system lets Chinese companies issue tradable securities in London, backed by shares in Shanghai. The plan envisages U.K. companies eventually being allowed to list similar instruments in China. However, only Chinese companies can raise new money, and the program will be structured to limit capital flight.

Despite fanfare in Chinese state media, analysts and investors have played down the program's appeal, since larger foreign institutions can already buy or sell mainland-listed Chinese stocks via Hong Kong, while Chinese investors are unfamiliar with many British companies.

Chinese foreign ministry spokesman Geng Shuang told a regular briefing on Thursday he wasn't aware of the specifics, adding that he hoped Britain would "provide a fair, just and open, nondiscriminatory environment for Chinese businesses to invest."

--Joanne Chiu in Hong Kong and Anna Isaac in London contributed to this article.

Write to Xie Yu at Yu.Xie@wsj.com

(END) Dow Jones Newswires

January 02, 2020 09:28 ET (14:28 GMT)

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