Hong Kong And LSE Detail Alliance Plans

by Mary Swire, Tax-News.com, Hong Kong

02 July 2002

After announcing a proposed alliance in May, Hong Kong Exchanges and Clearing (HKeX) and the London Stock Exchange (LSE) are moving quickly to make detailed plans. Carmen Moor, deputy head of corporate strategy for the London Stock Exchange (LSE), and the LSE's head of policy development, Patrick Morton, were in Hong Kong last week for talks with Hong Kong Exchanges and Clearing.

Ms Moor said that 200 Hong Kong stocks and 200 London stocks would join a cross-trading programme. She said it had been decided to choose a large pool of companies to be traded on both markets to "attract fund managers to do research on these firms and to raise the attention of retail investors".

Under the plans announced five weeks ago, the exchanges would offer trading in each other's most liquid stocks, and will simplify listing procedures to encourage dual listing. Trading will take place during local trading hours, and trades will be settled in domestic currencies, so Hong Kong investors would trade London stocks in Hong Kong dollars, while London investors would trade Hong Kong stocks in British pounds.

HKEx had been thought more likely to form a tie-up with the New York Stock Exchange, but said that the similarity in regulatory structures between London and Hong Kong had made it easier to partner with the LSE. Mr Morton said the LSE chose HKEx because more mainland companies were seeking dual listings in Hong Kong and London. "We see Hong Kong as a strategy springboard into Asia and an exciting gateway to China," he said. "LSE could be a gateway for Chinese companies to capture funding in Europe. We would like to see Chinese companies considering listing in Hong Kong also considering a dual listing in London."

One complication for the deal is that the LSE has passed its regulatory role to the UK's new Financial Services Authority last year, so that HKEx will have to work with the authority on simplifying approval procedures. Mr Morton said that HKEx and the LSE wanted to see companies being allowed to use the same listing prospectus to carry out initial public offerings in Hong Kong and London.

At present, 489 foreign companies have listings on the LSE, but only five of these also have Hong Kong listings, although the shares of many more Hong Kong companies are dealt on parallel markets.

Recommended