London-headquartered HSBC Holdings looks likely to become the first foreign company to trade on a Chinese stock exchange as part of a long-planned partnership between the Shanghai and London stock exchanges due to go live by the end of the year.
The hitherto unprecedented move is part of a wider effort to forge stronger links between London and Shanghai, and marks a continued opening-up of the Chinese financial services industry.
The long-awaited London-Shanghai tie-up, first reported by the Financial Times this morning, is part of a wider effort on the part of Beijing to connect China’s bourse with partner exchanges in foreign markets. The initial pairing between the London Stock Exchange and the Shanghai Stock Exchange will allow foreign investors to buy stocks indirectly, by acquiring depository receipts.
HSBC is leading the initiative by pioneering the trading link that is scheduled to go live in December, according to the FT. Initial talks proposing to list HSBC shares in Shanghai, where the international banking group has its origins, first began in 2007.
HSBC’s press office said of the planned link: “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.”
Under the plan, HSBC will become the world’s first recipient of Chinese Depositary Receipts (CDRs), the issue of which has also been under development for some 10 years. Last week, China’s securities regulator issued its guidelines for the cross-border stock exchange scheme, which will see the issuance of CDRs in lieu of investors’ acquiring direct shares.
HSBC is the world’s seventh-largest bank (and the largest in Europe), with total assets of US$2.37 trillion.