In the News: Shanghai-London Stock Connect; New Rules on Shanghai’s STAR Market; and Support for Smaller Brokerages
June 24, 2019 | BY
Marilyn RomeroThe Shanghai and London stock exchanges’ connect program has finally launched; new rules have been introduced to limit speculative trading of stocks on China’s new technology and innovation board; and the CSRC has urged major brokerages in the China to help smaller operations in the country's non-banking financial sector.
London Stock Exchange
Shanghai-London Stock Connect program is launched
The Shanghai-London Stock Connect program officially launched this week after nearly four years of preparation. Select companies that are listed on either the Shanghai Stock Exchange or the London Stock Exchange are now allowed to issue depository receipts on the other exchange. The scheme’s development has been supported by the U.K. and Chinese governments to encourage cross-border investment between the countries, and provide investors and companies in the countries with mutual access to each other’s capital markets. A quota system for maximum investment amounts has been introduced for the early stages of the program.
More from CLP: Shanghai-London Stock Connect Goes Live With Huatai Securities Debut; China Securities Regulatory Commission, Provisions for the Regulation of the Depository Receipt Business in the Stock Connect Between the Shanghai Stock Exchange and the London Stock Exchange (Trial Implementation) (Draft for Comments)
Shanghai Stock Exchange issues rules to limit speculation on STAR Market
The Shanghai Stock Exchange, or SSE, has announced rules that will be strictly imposed to limit speculative trading on the SSE STAR Market, China’s recently launched technology and innovation board. According to the SSE, the news rules will limit trading during unusual market fluctuations. New issues on the STAR Market will be allowed to trade freely on the market without limitation for the first five days, but after that period, a 20% upside and downside limit will be imposed. The new limits are twice that of other equity markets in China, which are subject to only 10% up and down daily limits. The STAR Market, which was launched last week, is expected to see the debut of about 20 Chinese technology companies in the near future. The new board is part of the government’s push to spur growth in the country’s technology sector.
CSRC urges big brokers to support smaller non-bank brokers
The China Securities Regulatory Commission, or CSRC, has urged the major securities houses in the country to provide liquidity support to smaller brokers in the non-banking financial sector, according to a Caixin report. The move is part of the CSRC’s efforts to address liquidity risks facing the sector in the wake of last month’s management takeover by the regulator of Baoshang Bank. Its concern is that there may also be potential instability among smaller non-bank financial institutions, and Beijing wishes to boost bank lending to help cushion the economic impact from the higher tariffs on Chinese imports imposed by the U.S.
The CSRC met with senior executives of top brokerages to discuss its concerns. Attendees included Citic Securities, China International Capital Corp., Huatai Securities, Guotai Junan Securities, China Merchants Securities, CSC Financial, Orient Securities, E Fund Management, and China Southern Asset Management.
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