Shanghai exchange confirms LSE trading link plans

Mar 15, 2016
<p>Preliminary agreement between two exchanges to prepare for Stock Connect scheme</p>

As exchange operators around the world tussle over proposed mergers with the London Stock Exchange (LSE), the Shanghai Stock Exchange (SSE) is poised to confirm a stock-trading link with the UK bourse.

In an announcement made on the Chinese exchange’s blog late last week, the SSE says it has reached a preliminary agreement with the LSE to create a ‘co-operation framework’ for a planned stock-trading link. The two bourses will now carry out further investigation into the feasibility of a Shanghai-London connection, the blog post continues.

Such an agreement would mimic the Shanghai-Hong Kong Stock Connect scheme launched in 2014, which allows international investors to trade Shanghai stocks via the Hong Kong exchange and vice versa.

The initial plans to link the two exchanges were announced in September 2015 by UK chancellor George Osborne while on a diplomatic trip to China. At the time, commentators picked out several potential roadblocks for any agreement, including limited support for short-selling, the current single-day timeframe for settling trades, and the use of renminbi as the sole settlement currency.

Concerns about the eight-hour winter time difference between the two exchanges were also aired at the time, leading LSE CEO Nikhil Rathi to defend the move and describe the difference in time zones as ‘complementary’ to trading. ‘There are of course going to be issues to work through,’ he added at the time.

In Shanghai, meanwhile, regulators have warned that recent improvements in the market have been built on shaky ground, as investors appear to be taking in good news while turning a blind eye to bad signs.

The SSE Composite Index, which comprises a weighted selection of all SSE-traded shares, gained 1.75 percent in 24 hours on Monday. The market’s daily turnover of 202.7 bn yuan ($31 bn) recorded on the same day, however, is just half the level recorded last autumn, and a quarter of the figure recorded at its peak in mid-2015.

Sign up to get stories direct to your inbox
logo-black logo-black