Upfront
OPINION INTERNATIONAL FINANCING REVIEW ASIA
London Disconnect
D
id Brexit just derail the Shanghai-London Stock
Connect link?
It's hard to imagine China's regulators were
unaware of the UK's impending departure from the EU
when they set a year-end target for the newest trading link.
But it's also hard to see another reason to delay the launch.
(UATAIû3ECURITIESûWASûDESTINEDûTOûBEûTHEûlRSTû#HINESEû
COMPANYûTOûmOATûINû,ONDONûUNDERûTHEû#ONNECTûFRAMEWORKû
with all efforts centred around a December 14 debut for
both Huatai's GDRs and the broader scheme. Bankers said
THEYûWEREûREADYûTOûLAUNCHûBOOKBUILDINGûLASTûWEEKûONLYûTOû
be held back by "technical issues".
4HEûTIMETABLEûHOWEVERûWOULDûHAVEûPUTûTHEûDEBUTûONLYû
THREEûDAYSûAFTERûTHEû5+gSûCRUCIALû"REXITûPARLIAMENTARYûVOTEû
WITHûVOLATILITYûGUARANTEEDûIFû-0SûREJECTûTHEûWITHDRAWALû
agreement.
It's fair enough that China would rather not allow
its latest link with the global capital markets to be
OVERSHADOWEDûBYû"RITISHûPOLITICSû!NDûTHEûRISKûOFûAûBIGûGAPû
between Huatai's offer price and trading debut cannot be
ignored.
-OREûFUNDAMENTALLYûTHOUGHûTHEûDELAYûTOûTHEû#ONNECTû
tie-up raises questions about China's capital market
reforms. Is the London scheme destined to be another failed
EXPERIMENTûALONGûTHEûLINESûOFû#HINESEûDEPOSITARYûRECEIPTSû
EARLIERûTHISûYEARûORûINTERNATIONALûBOARDSûINû3HANGHAIûOVERû
the past two decades?
2ULEûCHANGESûANDûPROPOSALSûHAVEûCOMEûTHICKûANDûFASTûTHISû
YEARûLEAVINGûNOûDOUBTûTHATû#HINAûISûDETERMINEDûTOûADDRESSû
THEûPROBLEMSûOFûITSûCLOSELYûCONTROLLEDûRETAIL
DRIVENûSTOCKû
MARKETû"UTûPRIORITIESûHAVEûCHANGEDûJUSTûASûFREQUENTLYû
4HEûLATESTûFOCUSûISûDEVELOPINGûAûTECHûBOARDûINû3HANGHAIûTOû
attract technology companies and end the money drain that
HASûSEENûTHEûLIKESûOFû4ENCENTû!LIBABAûANDûOTHERSûREWARDû
OVERSEASûSHAREHOLDERSûRATHERûTHANû#HINESEûCITIZENSû
4HISûISûAûWORTHYûAMBITIONûSINCEûITûWILLûUSHERûINûESSENTIALû
CHANGESûTHATûHAVEûBEENûLONGûOVERDUEûnûAûREGISTRATION
BASEDû
RATHERûTHANûAPPROVAL
BASEDûPROCESSûANDûMARKET
DRIVENû
PRICINGûTOûNAMEûBUTûTWOû)TûALSOûTAKESûUPûTHEûOBJECTIVEû
of the aborted CDR introduction and responds to recent
REFORMSûTHATûHAVEûDRAWNûMOREû#HINESEûTECHNOLOGYûANDû
healthcare companies to Hong Kong.
Creating a new marketplace will nonetheless take
MONTHSûNOTûLEASTûBECAUSEûREGULATORSûWILLûNEEDûTOûOVERCOMEû
long-standing concerns that a new board will drain more
LIQUIDITYûAWAYûFROMûTHEû!
SHAREûMARKETûnûWHICHûISûALREADYû
down 20% this year.
The London-Shanghai link is a more straightforward
CHANGEûANDûONEûTHATûREQUIRESûLITTLEûADDITIONALûWORKûATûTHISû
POINTû"UTûIFû#HINAûISûWORRIEDûABOUTûVOLATILITYûINû5+ûASSETSû
ORûIFûPRIORITIESûAREûSHIFTINGûTHEûLIKESûOFû(UATAIûMAYûHAVEûTOû
wait a while longer.
Praising Jakarta
W
ELLûDONEû)NDONESIAû4HEûSTAND
OUTûDEALûOFûTHEûLASTû
WEEKûINû!SIAgSûCAPITALûMARKETSûCAMEûFROMûnûOFûALLû
PLACESûnûTHEû)NDONESIANûGOVERNMENTû
)NDONESIAgSûLATESTû53BNûSOVEREIGNûBONDûAûSINGLE
DAYû
MARKETINGûEFFORTûONû$ECEMBERûûTOOKûADVANTAGEûOFûAû
rebound in risk appetite following news of a temporary
CEASElREûINûTHEû53
#HINAûTRADEûWARû
The timing was no accident: Indonesia had been ready to
GOûFORûTWOûWEEKSûBUTûWAITEDûFORûTHEûRIGHTûMOMENTûTOûPULLû
THEûTRIGGERû1UICKûEXECUTIONûWASûIMPORTANTûTOOûTHEûlVEûû
ANDû
YEARûDEALûLOOKEDûALLûTHEûMOREûIMPRESSIVEûAûCOUPLEûOFû
DAYSûLATERûASûDOUBTSûOVERûTHEûTRADEûDEALûSETûINûANDûMARKETSû
turned bearish once more.
4HISûKINDûOFûDRIVE
BYûEXERCISEûWOULDûHAVEûBEENû
UNTHINKABLEûFORûTHEû3OUTH
%ASTû!SIANûNATIONûONLYûAûFEWû
YEARSûAGOûBUTûITûISûSYMBOLICûOFûTHEûSTEPSûTHEûCOUNTRYû
HASûMADEûINûRECENTûYEARSûTOûMANAGEûITSûlNANCESûMOREû
PROACTIVELYû4HEûCENTRALûBANKûHASûRAISEDûRATESûSIXûTIMESûTHISû
YEARûTOûCOMBATûAûSLUMPûINûTHEûRUPIAHûANDûANALYSTSûHAVEû
come to see the focus on stability rather than growth as a
REASONûFORûCONTINUEDûCONlDENCEûINûTHEûECONOMYû
!FTERûBEINGûCAUGHTûINûTHEûGLOBALûROUTûINûEMERGING
MARKETû
CURRENCIESûTHEûRUPIAHûREBOUNDEDûALMOSTûûAGAINSTûTHEû
DOLLARûINû.OVEMBERû
4HEREûAREûCHALLENGESûAHEADûNOTûLEASTûINûTHEûGENERALû
ELECTIONSûSCHEDULEDûFORû!PRILûû"UTûIFûTHEûlNANCEû
ministry keeps up this kind of professional approach to the
CAPITALûMARKETSû)NDONESIAûWILLûALWAYSûHAVEûAûSTRONGûGLOBALû
following.
The delay to the Connect tie-up
raises questions about China’s
capital market reforms.