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The London Stock Exchange is working on a link up with the Shanghai Stock Exchange and because of the gentle prods by both of their respective governments the exchanges have made enough progress for a two-way trade facility to commence before the end of this year.

The two stock exchanges will set up London-Shanghai Stock Connect (or Shanghai-London Stock Connect, depending on where you are sitting) which will make it possible for traders in the UK to trade stocks in China and for Chinese traders to trade stocks in London.

Why London-Shanghai Stock Connect?

For traders based in the UK there are a few obvious questions. The top of this list is: why trade Chinese shares?

To start with the Chinese stock market ranks as one of the biggest in the world by market cap and daily trading turnover and if nothing else, it is simply too big to ignore. More compellingly some of the price increases, particularly in technology stocks, have been very impressive. Of course, like in any market there are also fallers and any investment requires thorough research beforehand but The Armchair Trader will keep you posted on our views about interesting stocks. There are not many Chinese brand names that are well known outside China but tech companies like Alibaba – the Chinese version of E-bay, Weibo – the Chinese version of Twitter, and computer maker Lenovo are recognisable names.

Company Exchange Share price today Price a year ago Y-o-Y change
Weibo Nasdaq $111 $55 101%
Alibaba NYSE $115 $170 47%
Tencent Hong Kong HKD243 $396 62%
Lenovo Hong Kong HKD3.69 HKD4.99 -21%

 

The next question is how to access a market that is fairly unfamiliar to UK traders? The best route is through a reputable broker. For instance HSBC offers access to Chinese markets as does Philip Global Markets. Closer to the time of the Stock Connect going live the exchanges will release a list of designated brokers that will be able to act as market makers.

And finally – what about the language barrier? The Shanghai Stock Exchange is already fully bi-lingual because it operates a very similar Stock Connect with the stock market in Hong Kong. The news and updates on trade regulation is released almost simultaneously in both English and Mandarin.

UK traders interested in the opportunity to trade physical shares in China, from the comfort of your front room, should come back regularly for updates on the latest developments with Stock Connect.

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Vanya Dragomanovich

Vanya is an award-winning financial journalist who has worked in both television and newswires. She spent over 10 years at Dow Jones covering commodity markets, including metals, coffee, cocoa and oil. She also reported from the floor of the London Metals Exchange, and appeared on CNBC to discuss international metals markets. Since then she has written for several leading financial publications, including serving as commodities editor for FTSE Global Markets.

Vanya continues to cover international commodities markets globally, specialising in particular on metals and alternative energy. She is also the author of a book on CFD trading.

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