IFR Asia – December 08, 2018

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#ONNECTûFRAMEWORKû

with all efforts centred around a December 14 debut for

both Huatai's GDRs and the broader scheme. Bankers said

THEYûWEREûREADYûTOûLAUNCHûBOOKBUILDINGûLASTûWEEKûONLYûTOû

be held back by "technical issues".

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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.

-OREûFUNDAMENTALLYûTHOUGHûTHEûDELAYûTOûTHEû#ONNECTû

tie-up raises questions about China's capital market

reforms. Is the London scheme destined to be another failed

EXPERIMENTûALONGûTHEûLINESûOFû#HINESEûDEPOSITARYûRECEIPTSû

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the past two decades?

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DRIVENûSTOCKû

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attract technology companies and end the money drain that

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OVERSEASûSHAREHOLDERSûRATHERûTHANû#HINESEûCITIZENSû

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BASEDû

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DRIVENû

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of the aborted CDR introduction and responds to recent

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healthcare companies to Hong Kong.

Creating a new marketplace will nonetheless take

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long-standing concerns that a new board will drain more

LIQUIDITYûAWAYûFROMûTHEû!

SHAREûMARKETûnûWHICHûISûALREADYû

down 20% this year.

The London-Shanghai link is a more straightforward

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wait a while longer.

Praising Jakarta

W

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OUTûDEALûOFûTHEûLASTû

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DAYû

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rebound in risk appetite following news of a temporary

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#HINAûTRADEûWARû

The timing was no accident: Indonesia had been ready to

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ANDû

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turned bearish once more.

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BYûEXERCISEûWOULDûHAVEûBEENû

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%ASTû!SIANûNATIONûONLYûAûFEWû

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YEARûTOûCOMBATûAûSLUMPûINûTHEûRUPIAHûANDûANALYSTSûHAVEû

come to see the focus on stability rather than growth as a

REASONûFORûCONTINUEDûCONlDENCEûINûTHEûECONOMYû

!FTERûBEINGûCAUGHTûINûTHEûGLOBALûROUTûINûEMERGING

MARKETû

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DOLLARûINû.OVEMBERû

4HEREûAREûCHALLENGESûAHEADûNOTûLEASTûINûTHEûGENERALû

ELECTIONSûSCHEDULEDûFORû!PRILûû"UTûIFûTHEûlNANCEû

ministry keeps up this kind of professional approach to the

CAPITALûMARKETSû)NDONESIAûWILLûALWAYSûHAVEûAûSTRONGûGLOBALû

following.

The delay to the Connect tie-up

raises questions about China’s

capital market reforms.