The Four Exchanges Of Capital Market Opening To The Outside World

After the critical years of reform and development, we face the opportunities that have not been seen in the past century. This year, the Chinese capital market is developing a new look. How can the participants in the global market view this change? What path can they take part in?

In December 5th, sponsored by the central broadcasting and TV station, Guangzhou, Hongkong and Macau, the headquarters of the big bay area and the southern financial and economic media group, and the twenty-first Century economic report, the 2019 China Southern Capital International Forum, an innovative and open China capital market, was held at Poly InterContinental Hotel, Shanghai.

The forum has specially set up the global round table special field, and invited the representatives of the world-renowned exchanges including the Shanghai Stock Exchange (hereinafter referred to as the Shanghai Stock Exchange), the Tokyo stock exchange, the London Stock Exchange (hereinafter referred to as the LSE), and the Singapore Exchange. These heavyweight guests expressed their views on the opening up of China's capital market and the opportunities of interconnection and exchange.

Shi Donghui Gan Jun photo

Actively promoting two-way cooperation

Looking back to the 2019, China's capital market has taken a big step forward in opening up to the outside world, and the interconnection and exchange between exchanges is a heavy color.

In June 17th, the China Securities Regulatory Commission and the financial behavior supervision bureau of the United Kingdom issued the joint announcement of Shanghai Lun Tong, in principle, approved Shanghai Stock Exchange and Lun Tong to carry out Shanghai Lun Tong. On the same day, the first global depository receipts (GDR) product issued by Limited by Share Ltd, a listed company of Shanghai Stock Exchange, was listed on the stock exchange of Lun.

Ai Dehua, chief representative of the LSE, said that the early assessment of Shanghai Lun Tong was very positive because such an architecture was rooted in a deep commercial foundation.

He said: "at present, China is vigorously promoting internationalization, and Chinese enterprises are actively acquiring new customers to enter the European and British markets. It is indeed necessary for Chinese enterprises to raise funds overseas to achieve acquisitions. GDR is a very attractive and mature product. The equity products including GDR in the London market are widely accepted by the whole world. It meets the basic needs of the market and echoes the general trend of globalization. The launch of this product is just like that, and we will continue to push it forward. "

As an important symbol of interconnection between China and overseas capital markets, Shanghai and Shanghai have been running smoothly for nearly half a year. After making a series of progress in the west towards GDR, market participants are also looking forward to having the first East to CDR.

Ai Dehua said frankly, when the east to CDR, the timetable is not yet determined, but listed companies in the UK are very interested in issuing CDR in the Chinese market.

He pointed out: "there is a strong fundamental driving force for British companies to list and issue CDR in China. Some of the FTSE 100 shares come from the international market and many come from the Chinese market. The listing of British companies in China can increase their popularity, for example, there will be a lot of coverage of securities companies. This is very necessary for British companies. There is no specific timetable for East CDR, but it does meet the needs of the market. "

In addition to the Shanghai Lun Tong, after nearly a year's preparations, in June 25, 2019, the Shanghai Stock Exchange and the Japan exchange group (hereinafter referred to as the Japanese exchange group) held the opening ceremony of the ETF exchange between China and Japan, and 4 Chinese and Japanese ETF exchange products were successfully listed on the Shanghai Stock Exchange.

Ai Dehua Gan Jun photo

"The ETF exchange is a very good start," the chief representative of the Beijing Office of Tokyo Stock Exchange said at the roundtable forum. We are now in discussions with the Shanghai Stock Exchange on how to consolidate products in the future and how to carry out new products in the future. But a good beginning is half done. In addition, our cooperation with China's related exchanges is comprehensive, not limited to individual products, and there are many other ways to learn from each other in the future.

Shi Donghui, director of the Capital Market Research Institute of Shanghai Stock Exchange, said that the Shanghai Stock Exchange's opening to the outside world mainly focuses on three aspects:

"First, the interconnection between investors and capital is most representative of the launch of Shanghai and Hong Kong in 2014 to achieve two-way investment and capital interconnection between domestic and foreign investors. Second, the interconnection of the financing of listed companies. In June 2019, we launched the Shanghai stock exchange with the London Stock Exchange. The first GDR product issued by Huatai Securities was listed on the stock exchange of LSE. Third, through the transaction products to achieve domestic and foreign markets Unicom. The Shanghai Stock Exchange's ETF market is very distinctive. We introduced the ETF of the state-owned shares, the ETF of the Hang Seng Index, the standard & Poor's 500 index ETF, the Nasdaq 100 index ETF, and the German DAX30 ETF. In June this year, we opened the new mode of Sino Japanese ETF interoperability with the Tokyo stock exchange, and 4 Chinese and Japanese products were successfully listed on the Shanghai Stock Exchange.

Another Singapore Exchange, which participated in round table discussions, said that its cooperation with domestic capital markets was mainly based on the listing of domestic enterprises to Singapore exchanges.

Chief representative of Beijing Office of Singapore Exchange, Xie TSE said, "Singapore exchange derivatives business has developed fairly well, and derivatives business and securities business account for half of the exchange earnings. Another major business is data services. In recent years, through the continuous increase of transactions, the new stock exchange has packaged some existing data resources to market. These data have advantages because of greater transparency.

In addition, Xie TSE said that at present, China's Listed Companies in the new stock exchange have the largest number of real estate enterprises. Because the new exchange real estate trust is more famous, and the real estate diversification degree is very high, all kinds of assets will be packaged in the form of real estate trust, including some logistics data centers, and they can also carry out asset securitization.

At present, in order to focus on the development of real estate, health care, technology and other sectors promoted by the new exchange, the new exchange will have more cooperation with the pre investment platform and the OTC platform, such as foreign exchange and the OTC market of commodities.

Hometown: Gan Jun photo

Registration experience

This year, science and technology board opened, registration system also landed on the Chinese capital market.

From the experience of overseas exchanges, what do we need to pay attention to in implementing the registration system? Ai Dehua pointed out that the implementation of registration system has a breakthrough significance, but like other projects, the risk is parallel.

To minimize risks, he believes that regulation and investor education are very important. In terms of information disclosure, registration system can help investors get more comprehensive and accurate information disclosure more effectively. In addition to regulation, investor education is also a crucial issue. Many exchanges are doing investor education, or providing more opportunities for face to face with investors. London Stock Exchange has a specialized service platform that helps investors acquire the richness of information through data, documents and videos in order to make better investment choices.

"I think registration system is a breakthrough innovation. We have seen that Chinese investors have made great progress in education, and I am very looking forward to the future development." Ai Dehua said.

His hometown also recognizes that while promoting registration system, investor education is a priority work. He said: "in investor education, it is necessary to explain clearly to the retail investors what the risks are, and the Tokyo stock exchange has also done a lot of basic work so that investors in the market can understand what to do after entering the market."

In addition, in regard to the registration system audit, his hometown thinks that from the approval of the regulation to the approval of the exchange itself is an inevitable form of development.

He said: "the Tokyo exchange has been approved by the Japanese authorities for a long time. In the late stage, with the continuous improvement of the rules and regulations, the Japanese authorities also delegated authority to the exchange level. However, the audit of the exchange level must reflect the independence of the censorship institutions. One of the four institutions of the Japanese exchange is an independent legal person specializing in the listing of enterprises. I personally believe that the independence of listing review or listing approval under the premise of establishing a legal framework is critical. "

Xie Cai - Gan Jun photo

Imagination of interconnection

After sharing the mature experience of the registration system, Shi Donghui shared the experience gained from the exchange between the Shanghai Stock Exchange and other regional exchanges.

Shi Donghui said, "first, respecting the trading habits of foreign investors and the general rules and practices of mature markets. For example, our cooperation with LSE has taken into consideration the prevailing rules and design to facilitate investors' two-way conversion between GDR and A shares. Second, we should constantly improve and optimize the relevant mechanisms and institutional arrangements for interconnection. Third, we should pay attention to exporting Chinese models and programmes. There are also some good practices and practices in the domestic market which are worthy of reference from overseas markets, such as China's penetrating regulation, with the help of technological progress and the establishment of a penetrated account system, which will bring great convenience to regulation.

Thinking about the form of cooperation between the Shanghai Stock Exchange and other exchanges in the future, Shi Donghui said, "cooperation is a matter of two levels: one is the cooperation at the market level, the other is the cooperation between the two exchanges."

Finally, Shi Donghui introduced: "in the specific way of cooperation, the Shanghai stock exchange mainly takes the form of equity investment. In 2015, the China Financial Futures Exchange and the German exchange group formed a Sino European international exchange in Frankfurt. The exchange now mainly produces some financial products, cross border ETF, and the first D shares, Qingdao and Haier, are listed on the list in Central Europe in October 2018. In 2017 and 2018, we took part in the Karachi exchanges in Pakistan and the Dhaka exchanges in Bangladesh, from the aspects of system development, information exchange, product design and marketing. In the future, the Shanghai Stock Exchange will seize the strategic opportunity of the new round of opening up to the outside world, actively promote various international business processes, explore and increase the degree of internationalization, and build a world-class exchange.