The successful listing of Huatai Securities on the London Stock Exchange will encourage more Chinese companies to raise funds via the Shanghai-London link and align stock pricing with international practice, according to analysts. The Nanjing, Jiangsu province-based brokerage has risen 7.3 per cent from its offer price after a second day of trade in London, after raising US$1.54 billion from selling global depository receipts. It was the first Chinese company to list depository receipts through the much-heralded programme linking the Shanghai Stock Exchange with the London bourse. “It’s a successful listing as Huatai did raise money from international investors and the depository receipts fared well after the listing,” said Dai Ming, a fund manager at Hengsheng Asset Management in Shanghai. “It’s an important step the Chinese companies have made to go outside and more will follow suit.” The Shanghai-London exchange link, which officially kicked off with the listing of Huatai Securities on Monday after being postponed in December, reflects a further opening of China’s stock market, the world’s second largest with a combined value of US$6.4 trillion. While investors from the mainland and overseas can directly trade a number of selected companies on both bourses under the stock connect programmes with Hong Kong, traders can only access depository receipts through the Shanghai-London link. At present only main board-listed companies on the two exchanges are included in the programme and able to offer the surrogate securities. Overseas traders can buy and sell global depository receipts of Chinese companies through the westbound channel, while mainland investors can trade the surrogate securities of London-listed companies via the eastbound channel, which has yet to start. Both channels are subject to aggregate quotas during the initial stage. London-Shanghai stock connect goes live, allowing foreign firms to list their shares in mainland China for the first time The new exchange link adds to the fundraising channels for Chinese companies, which have traditionally favoured New York or Hong Kong for overseas listings. “It’s a good international exposure,” said Hong Hao, managing director at Bocom International Holdings in Hong Kong. “But we need to be patient with the process, given the volatile market conditions [at home and abroad].” Huatai Securities closed 3.5 per cent higher at US$22 in London on Tuesday. That was equivalent to 15.19 yuan per share, given each depository receipt represents 10 underlying shares. The brokerage last finished at 20.32 yuan in Shanghai on Wednesday, which can be translated into a 34 per cent premium to the London-traded securities. Traders will be able to arbitrage the price discrepancy when conversions between the depository receipts and the underlying shares begin in about four months. “Once conversions are allowed, it will put big pressure on Huatai’s stock on the home market because of the room for arbitrage,” said Dai. “But at the same time, that will make the pricing mechanism of local stocks more in line with the global practice and more reasonable.”