HSBC Gears Up for China Listing Through Shanghai-London Link
Bank is first U.K. firm to confirm interest in program.
(Bloomberg) -- HSBC Holdings Plc is examining plans for the upcoming Shanghai-London trading link, a move that could see Europe’s largest bank list shares in China.
London-based HSBC is the first U.K. company to publicly state an interest in taking part in the program, which will allow firms listed on exchanges in either of the two cities to issue depositary receipts on the other’s venue.
“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,” HSBC’s Hong Kong-based spokeswoman Vinh Tran said in an email.
An HSBC listing using the connection would be a boost for Chinese authorities, who have watched their benchmark index fall more than 20 percent this year amid a worsening economy and an escalating trade war with the U.S. The link is part of a broader effort to globally integrate China’s financial markets and internationalize its currency while maintaining some of the world’s strictest capital controls.
The plan to issue London Stock Exchange-listed HSBC shares in Shanghai is viewed as a symbolic step after years of planning, the Financial Times reported earlier, citing two unnamed people with knowledge of the matter.
“There’s strong demand for foreign stocks among mainland investors in China,” said Stanislas Beneteau, U.K. head of financial intermediaries and corporates at BNP Paribas SA in London. “We are seeing interest from clients.” The program could see 50 companies on the Shanghai and London sides list on each others’ markets within a few years, he said.
Expanding HSBC in key Asian markets including China is a core part of its strategy under John Flint, who became CEO in February. Asia contributed 77 percent to HSBC’s adjusted pretax profit in the first half.
Shanghai-London Link versus Hong Kong Connect
| The LSE-Shanghai Stock Exchange link will give Chinese companies the ability to raise capital in Europe’s largest equity market. London-listed companies will be able to issue shares in China, but not raise fresh capital | The links between Hong Kong’s stock exchange and bourses in Shanghai and Shenzhen are direct trading links, where orders are placed at one venue and executed in another location |
| Both sides have said the link will start in 2018 | H.K.-Shanghai started in 2014, while the link with Shenzhen began in 2016 |
| Just one Chinese company has said it plans to list in London; HSBC is the first U.K. firm to express an interest | More than 1,400 Chinese stocks are available to buy and sell via Hong Kong; Chinese investors have access to more than 300 Hong Kong-listed shares |
HSBC’s former Chief Executive Officer Stuart Gulliver said in May 2011 that he wanted the bank to be the first foreign financial institution to be listed on the Shanghai Stock Exchange under an earlier proposed plan to have foreign firms list in China. The company has roots in the city; its origins date to 1865, when it operated as the Hongkong and Shanghai Banking Corp. to finance trade in opium, silk and tea.
The Shanghai-London Stock Connect has been in the works since at least 2015, when then-U.K. Chancellor George Osborne visited China. Huatai Securities Co., China’s third-largest brokerage by value, has said it plans to list in London using the link. The program may be operational as early as Dec. 3, China’s state-run Shanghai Securities News previously reported.
--With assistance from Lucille Liu.
To contact the reporters on this story: Benjamin Robertson in Hong Kong at brobertson29@bloomberg.net;Alfred Liu in Hong Kong at aliu226@bloomberg.net;Viren Vaghela in London at vvaghela1@bloomberg.net
To contact the editors responsible for this story: Sam Mamudi at smamudi@bloomberg.net, Ross Larsen, Paul Armstrong
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