London eyes more floats using GDRs

The London Stock Exchange is mulling more flexible listing standards to accommodate more Chinese floats in London via its stock connect program with Shanghai and Shenzhen.

"We are looking at the listing requirements in London and I am optimistic that very soon we will be able to have more flexible listing standards that will make it even easier for some companies to list in London," said David Schwimmer, CEO of the London Stock Exchange Group, which owns the LSE.

By providing more flexibility on accounting standards, the LSE is set to reinforce its competitiveness in attracting Chinese listings in the form of Global Depository Receipts, which are exchangeable with their domestic stocks, Schwimmer told China Daily.

Via the Shanghai-London Stock Connect, which debuted in June 2019 and was designed to enable Shanghai-listed companies to sell shares in London and vice versa, five Chinese companies have so far issued GDRs in London, raising 6.19 billion yuan ($858 million) in total, according to market tracker Wind Info.

Last year, the connect program was upgraded and now allows eligible companies listed in either Shanghai or Shenzhen to issue GDRs in London, Zurich or Frankfurt.

London's status as an overseas listing destination for Chinese companies has since then faced more competition from its European peers, with Zurich having so far seen 14 Chinese GDR listings, which, based on Wind info data, raised 4.4 billion yuan in total.

Schwimmer said the LSE is having productive discussions with potential Chinese issuers and is looking forward to welcoming listings from a broader range of Chinese enterprises as the Shenzhen Stock Exchange — home to innovative, high-growth Chinese firms — joined the connect program last year.

"I think there is a real opportunity for a range of different kinds of companies (to get listed), both the very large ones and also some potentially smaller ones in different industries," Schwimmer said, adding that London should be particularly attractive for companies looking to raise capital from international investors and promote their brand on the international stage.

So far, the five Chinese GDR listings in London are mainly blue chips in the financial and energy sectors, such as China Yangtze Power Co Ltd, a State-owned Shanghai-listed power company with a market capitalization of more than 500 billion yuan.

Schwimmer said the group also sees "an increasingly interesting opportunity" when it comes to the significant growth potential of China's derivatives market and the country's steady steps to open up this market to foreign market participants.

Financial market infrastructure and data provider LSEG has already tapped into the opening-up of China's derivatives market via Tradeweb, a fixed-income trading platform in which the group owns a majority interest. It has become one of the approved overseas electronic trading platforms of Swap Connect.

Northbound trading of Swap Connect, which kicked off in May, facilitates the access of overseas investors to onshore interest rate swaps as one of China's latest efforts to open up the onshore derivatives market.

Impressed by China's consistent regulatory efforts to deepen capital market reforms and opening-up, Schwimmer said the group has "a lot of confidence" in the development prospects of China's capital market.

"To manage the regulatory environment in a stable, thoughtful and consistent way is what we have seen from Chinese regulators. We continue to be very focused on and committed to this market and look forward to participating as it continues to grow and develop," Schwimmer said.