HSBC to be first foreign company to trade on Chinese Stock Exchange

HSBC will be the first foreign bank to offer Chinese Depository Receipts which is a traceable security that represents shares that are listed elsewhere.

Plans for the London-Shanghai stock exchange have been in the works for a long time, and in recent months it has rapidly developed for its launch at the end of the year.

View of a branch of a signboard of HSBC in Ji'nan city, east China's Shandong province, 12 May 2016. [Photo: IC]

These plans will give global investors the chance to access shares in Chinese companies and vice versa – Chinese investors will have a chance to buy London stock listed stock.

Jason Lui, head of Asia Pacific equity derivative strategy at BNP Paribas, told the Financial Times: "It's significant as this is the first time Chinese domestic investors can trade a foreign company in their own market through Chinese Depository Receipts.

"This is a way to test CDRs through this new channel because, for onshore investors, the CDR is still a very new concept."

Talks to list HSBC on the Chinese stock exchange have been ongoing for over ten years, although initial plans did not work out as initially expected.

Mr Lui also said that: "China is fast becoming the biggest consumption market for many international companies."

Last month, the Shanghai stock exchange published guidelines which outlined how the London-Shanghai stock link would work.

The rules, as outlined by the Shanghai Stock Exchange, will require companies on the London Stock Exchange to meet minimum requirements to be able to access Chinese investors listed on the exchange.

Such minimum requirements include the length of time a company has been listed on the exchange – any company listed under six months cannot access the exchange – and a minimum company value.