HSBC considering listing shares in China as London-Shanghai stock link looms

HSBC Holdings has begun revisiting a plan to list its shares on the mainland, putting it on track to become first foreign company to issue depository receipts on the mainland under the scheme that links the Shanghai and London stock exchanges.

The biggest lender in Hong Kong and Europe said in a statement on Thursday that it was studying the framework of the trading system, but would not comment further.

The remarks came after the Financial Times reported that HSBC would tap the connect to list shares on the mainland following an eight-year hiatus.

Under the depository receipts system, part of a company’s shares are transferred to a custodian bank before being traded by investors on an overseas course.

The stock connect scheme is set to become operational this year, according to the mainland securities regulator.

Hong Kong’s stock connect schemes with Shanghai and Shenzhen, launched in 2014 and 2016 respectively, enables cross-border trade in hundreds of large-cap stocks via local brokerages.

Under the London-Shanghai link investors are able to access only the depository receipts.

Foreign companies can issue Chinese depository receipts on the Shanghai Stock Exchange and mainland companies offer global depository receipts.

By using the depository receipt mechanism, the mainland regulator is able to control the pace of share issuance to prevent an influx of fresh equity from flooding mainland exchanges.

It is believed that only individual mainland Chinese investors who have a capital base of no less than 5 million yuan (720,900 USD) will be allowed to buy the Chinese depository receipts.

Meanwhile, mainland investors with financial assets of at least 500,000 yuan are allowed to buy designated Hong Kong-listed shares via the existing connect schemes.