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HSBC on track for China listing through the long-awaited London-Shanghai stock connect

posted onOctober 18, 2018

HSBC, Europe's biggest bank, could become the first foreign company to trade on a Chinese index the Financial Times reported Thursday.

The offering may occur through the establishment of a stock exchange link between the markets in Shanghai, where the international banking group has its origins and London, according to the report.

"In a move that has been in the making for more than a decade, the London-Shanghai stock connect plans to make the bank the first offering of Chinese depositary receipts (CDRs) — a tradeable security that reflects underlying shares listed elsewhere," the London-based newspaper reported.

The scheme is set also to give international investors the possibility to access shares in Chinese companies and Chinese investors to buy stocks listed on the London Stock Exchange (LSE). 

The trading link which is seen getting online before the end of the year, comes as the world's second largest economy opens up its equity market to foreign investors in a controlled manner. In June, a total of more than 230 Chinese large-capitalisation A shares debuted on MSCI's indices, including its flagship Emerging Markets Index.

HSBC’s press office declined to comment on the details of the plan. "We are studying the proposed framework for the listing of Chinese Depositary Receipts under the Shanghai-London Stock Connect but cannot comment further at this time." 

The first initiative for listing HSBC shares in Shanghai started in 2007 but eventually faded. 

“They have been trying to do this for years and this could be the time they succeed,” the FT said, citing a person with knowledge of the matter. 

HSBC Holdings PLC (HSBA.L)

hsbc stock

(source: Reuters)

Last month, Huatai Securities,  China’s third-largest brokerage by value, revealed plans for listing global depositary receipts on the London-Shanghai stock connect in an attempt to raise $500 million.This was the first proposed offering of shares by a Chinese company in London through this trading link. 

On the flipside, London-listed companies will not initially be allowed to raise fresh capital through the scheme but will only have the possibility to float existing shares.

Last week, the China Securities Regulatory Commission (CSRC) published its rules for the cross-border stock exchange scheme, which will see the issuance of CDRs in lieu of investors’ acquiring direct shares.

“The provisions stipulate normative requirements for market entities as well as their activities under Shanghai-London Stock Connect, committed to the principles of protecting the legitimate interests and rights of investors, maintaining market order and containing financial risks” CSRC said in the statement.

Xiaomi, the world’s fourth-largest smartphone maker, which made a market debut in Hong Kong in July, scrapped plans to launch CDRs in Shanghai before its IPO.

London-headquartered HSBC was founded in 1865 to finance trade between Asia and the West. The bank’s name is derived from the initials of the Hongkong and Shanghai Banking Corporation Limited, the founding member of HSBC. Today HSBC is the world’s seventh-largest bank with total assets of US$2.37 trillion, serving more than 38 million customers. 

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