|Staff Reporter |||May 20, 2020 02:00 PM EDT|
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China is now actively pushing for local companies to list their shares in London instead of the United States as relations between two of the world's largest economies continue to sour. The move comes as the US escalates its scrutiny of Chinese companies wishing to list in the country's exchanges following the Luckin Coffee financial misconduct scandal and the rising tensions surrounding the debate over the origins of the coronavirus pandemic.
Finance authorities in China are now tapping into the Shanghai-London Stock Connect scheme, which was originally launched last year, to push for bilateral investments. Since its launch, only one Chinese company, Huatai Securities, was able to list its shares in London. Authorities are now aiming to change that by giving other Chinese firms the go signal to proceed with their planned London-listings.
Sources with knowledge of the matter revealed that authorities have granted approvals for China Pacific Insurance and SDIC Power to proceed with their planned London listings. China has reportedly also urged China Yangtze Power to move ahead with its planned secondary listing in London.
In a statement to reporters, the Shanghai Stock Exchange, which operates the Stock Connect scheme, clarified that the decision to list in London were the companies' own decisions and were not politically motivated. Since the Luckin Coffee scandal was publicized, scrutiny on Chinese firms wishing to list in the US has intensified. US lawmakers have also begun pushing to tighter regulations against foreign firms listing in the country.
Through the London-Shanghai Connect Scheme, Chinese firms can add a secondary listing of Global Depositary Receipts in Europe, which will be linked to their shares in Shanghai. Analysts have claimed that the second half of the year could see several Chinese firms listing in London as the country pushes to fund its economic recovery.
As for which of the companies will likely be listing first, most experts are betting on China Pacific Insurance to make the first move. The company is expected to raise between $2 billion and $3 billion if it pushes ahead with its share sale, which is predicted to happen sometime in October.
Market experts predict that China Yangtze Power could be next in the London-Shanghai listings pipeline, with the company likely raising around $2.5 billion. Some analysts have pointed out that the share sales will be faced with tough challenges ahead given the current state of the market. Investors, even those in Europe, will likely still be reluctant to buy "non-essential" assets, with most choosing to be selective with financial decisions until the market stabilizes.
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