Stock Connect: China's beneficial ownership questions explained

Author: | Published: 9 Dec 2014

Questions about Chinese beneficial ownership have hampered Ucits’ ability to invest through the Stock Connect. But the real issue may be enforcement

Funds, particularly European undertakings for collective investments in transferable securities (Ucits), which are sold widely in Asia, are reportedly not investing in Shanghai listed A-shares, through the Stock Connect due to a lack of clarity on the rights of beneficial owners in China. This is because shares acquired by Hong Kong or northbound investors through the Stock Connect are held at the China Securities Depository and Clearing Corporation (CSDC), in the name of the Hong Kong Securities Clearing Company Limited (HKSCC) and not in the name of the investors themselves.

Recognition There is a misimpression in the market that beneficial ownership is not recognised in China. However the concept of a nominee holder holding shares on behalf of the actual or beneficial owners of shares can be found in...