20 Dec 2021

(Yicai Global) Dec. 20 — China’s main securities regulator has proposed an expansion of the Shanghai-London Stock Connect scheme to cover eligible companies listed in Shenzhen, Switzerland, and Germany for the first time.

The China Securities Regulatory Commission issued new rules regarding the cross-border securities connectivity program on Dec. 17 to increase the total to 47 articles from 30.

The adjustment follows European stakeholders’ requests of establishing a similar stock connect program with the mainland as London has had since 2018. The new rules would mean that companies listed in Switzerland and Germany could issue Chinese Depositary Receipts to trade on the mainland to raise capital while adopting a market-based inquiry mechanism for pricing. It would also enable offshore investors to access Shenzhen-listed firms via the same program.

Since the introduction of the Shanghai-London Stock Connect, four Shanghai-listed firms, including Huatai Securities, have completed Global Depositary Receipt issuances on the London Stock Exchange, raising a total of USD5.8 billion.

There are conditions to the channel expansion. The funds that foreign companies would raise via CDRs should be used in their main business and the issuances should comply with China’s regulations on foreign investment and foreign exchange management, said the CSRC.

The revised rules propose improved information disclosure supervision regarding annual reports, equity changes, as well as major asset restructuring.

Editor: Emmi Laine, Xiao Yi