UK Support of Hong Kong Protests Kills Shanghai-London Market Connect


This is not investment advice. The author has no position in any of the stocks mentioned. has a disclosure and ethics policy.

The much-hyped market connect that links China and the UK has been suspended owing to tension between London and Beijing over support for the continued protests in Hong Kong.

According to sources that spoke to Reuters, UK government support of protestors in Hong Kong via its condemnation of the police has led to the connect being halted. Recently, China’s ambassador to the UK, Liu Xiaoming, accused Britain of “interference” in Hong Kong by covertly backing the protests. The London Stock Exchange has not publically commented on the issue.

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Protests in Hong Kong are now past the six-month mark with no end in sight. A protest on January 1 broke existing records for crowd size with over a million people taking to the streets.

The market connect was first activated in June. The idea behind the market connect is to allow firms in the two countries to cross-list their shares via the respective exchanges in London and Shanghai, bringing access to international capital. This will be done via Global Depository Receipts, or GDRs, and not direct shares. GDRs are a bank certificate that represents shares in a foreign company, held by a local branch of a foreign bank. Effectively this means that an investor can ‘buy local’, saving the trouble of opening a foreign brokerage account and exchanging currency but get exposure to the growth of a foreign market.

For the UK, the market connect was a way to open up new trading channels in an era of Brexit. China is currently the UK's fifth-largest trading partner and the second-largest non-EU partner after the United States. Economic growth in the UK has been quite stagnant post-2008 recession, and this interconnect would give UK firms a chance at a fresh channel of capital all while keeping the deals domestic. This would allow fund managers that might not be allowed to buy non-local stocks a chance at diversifying their portfolio. On the Chinese side, this would allow investment into foreign markets without having the capital leave China and be converted away from RMB.

So far only one company, Huatai Securities, has made use of the link. No UK-listed company has used it to issue depositary receipts in Shanghai.

According to data from Refinitiv, the London Stock Exchange had its worst year for new listings in 2019 given the uncertainty from Brexit.

London is the world leader in offshore RMB trading, with half of all offshore RMB foreign exchange trading taking place in the City.

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