December 5, 2018 / 9:31 AM / 5 days ago

Shanghai-London Stock Connect launch delayed by at least a month - sources

* Plans until this week were for scheme to go live by year-end

* Huatai Securities’ U.K. prospectus had been expected this week

* Technical issues, Brexit vote might be factors in the delay

By Samuel Shen and Julia Fioretti

HONG KONG, Dec 5 (Reuters) - The launch of the Shanghai-London Stock Connect scheme will be delayed at least one month, people with knowledge of the matter said, in a blow to Beijing’s plan for at least one leg of the two-way investing scheme to be up and running by year-end.

Last week, Huatai Securities became the first Chinese company to win approval from China’s securities watchdog to sell shares in London, sparking widespread expectation its listing of Global Depositary Receipts (GDRs), initially planned for next week, would have marked the launch of the Connect scheme.

Under the Connect, Shanghai-listed companies would be able to raise funds in the U.K. stock market while British companies could broaden their investor base by selling shares in Shanghai.

But launch of the Connect, symbolized by Huatai’s planned London listing on Dec. 14, has been delayed by at least one month, according to one source with knowledge of the issue.

The source added that a launch ceremony for the Connect, planned for next week in London, has been called off. Publication of Huatai’s prospectus for its share sale has been delayed, another person said, but gave no timing details.

Huatai did not immediately respond to a request for comment. Neither did the China Securities Regulatory Commission, the Shanghai Stock Exchange nor the London Stock Exchange.

A Chinese media report said the delay was linked to the Dec. 11 parliamentary vote on the U.K’s Brexit deal, which is likely to create market turbulence.

Two sources involved in the technicalities of the scheme said the hold-up was partially related to a lack of clarity from Chinese regulators over key technical issues. One said these included how Beijing wanted to treat any currency conversion back into yuan, and whether the scheme would operate under a currency quota.

The sources declined to be named because they were not authorised to speak to the media.

JOINING THE WORLD

Developing a tie-up between Shanghai and London is the latest in a series of efforts by China to gradually bring its vast stock markets into the world trading system.

Earlier this year, Shanghai’s plans to bring tech titans such as Alibaba home, via so-called Chinese Depositary Receipts (CDRs), foundered as regulators wrestled with the technical details.

Bankers involved in efforts to build the London-to-Shanghai leg of the new Connect have said privately that any plans by a U.K. company to list shares in Shanghai via CDRs were still months away as they and regulators work through the details.

Under the scheme as it is currently planned, Chinese companies will be able to raise fresh capital in London through selling GDRs. U.K. companies can only issue Chinese Depositary Receipts (CDRs) backed by existing shares, meaning they cannot raise fresh funds.

China and Britain had been due to hold their annual economic and financial dialogue in Britain before the end of this year, but that has now been pushed into next year, two sources familiar with the discussion told Reuters on condition of anonymity, though no date has been set.

At last year’s dialogue, held in Beijing, the two countries had agreed to speed the introduction of the stock connect programme. (Reporting by Samuel Shen in SHANGHAI, Julia Fioretti and Julie Zhu in HONG KONG and Dasha Afanasieva in LONDON; Writing by Jennifer Hughes; Editing by Richard Borsuk)

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