China Temporarily Suspends Exchange Listings with London

Shanghai, China. Several sources have revealed that China has suspended a cross-border listing project between the London and Shanghai stock exchanges temporarily. Politics was reportedly the reason for Beijing’s decision.

The establishment of the Shanghai-London Stock Connect program allows companies listed on the London Stock Exchange (LSE) and the Shanghai Stock Exchange (SSE) to record, issue, and trade depositary receipts in each market following existing regulations.

The goal of the stock connect project was to develop stronger and better ties between China and Britain. It would also assist in providing more liquid markets for the companies listed on both exchanges by providing them with access to a more extensive investor base. Blocking the project, even for a short period, places its future in doubt.

Five different sources reportedly told Reuters that politics was behind Beijing’s decision to suspend the cross-border listings. They spoke to the news organization on the condition of anonymity. Some of the sources were public officials, while others are involved in prospective deals between the two countries.

Two of the sources claimed that the UK’s stand on the protests in Hong Kong as one of the reasons for the suspension.

China was said to be unhappy about the perceived interference by other governments. Beijing has also blamed the anti-government protests and sentiment on meddling by foreign powers, including the United States and the United Kingdom.

The Shanghai Stock Exchange and the China Securities Regulatory Commission have been asked for comments but have not responded. Similar requests made to the London Stock Exchange and Britain’s Ministry of Finance, but spokespersons for both institutions have declined to say anything.

China’s Ministry of Foreign Affairs said in a statement that the bureau wasn’t aware of the details. However, the note also mentioned the country’s hopes that Britain can “provide a fair and unbiased business environment for Chinese companies.”

It also said that it hopes the UK would create the right conditions for the two countries to “carry out practical cooperation smoothly in various fields.”

UK businesses and banks involved in the connect scheme are monitoring how newly elected Prime Minister Boris Johnson would react to the news and how he’ll handle the country’s relations with China.

Traders are predicting the news will impact the already struggling pound. The currency already took some hits in the GBP/JPY and the GBP/USD.

The cable couldn’t push past the 1.3300 level this week and is sitting lower. There’s some resistance at the 1.3282 area that’s keeping the upside move stable.